On 21 July 2020, HMRC published draft legislation for the application of a 2% surcharge on residential Stamp Duty Land Tax (SDLT) for non-residents from 1 April 2021.
HMRC had previously consulted about such a measure and draft legislation has now been published for comment.
These new measures will apply to all residential transactions completing or substantially performed after 31 March 2021. This is subject to some transitional rules for transactions on contracts that were exchanged on or before 11 March 2020, but are not substantially performed or completed until after 31 March 2021.
The draft legislation sets out the various definitions of ‘non-resident’ depending on the party involved and will mean a new definition of ‘non-resident’ for individuals, broadly looking at whether or not you have spent more than 183 nights within the UK, in the last 12 months. It will also require enquiries to be made on the shareholders of UK resident close companies, as well as analysis of where the tax residency of a company is located. Where a UK close company is controlled by non-resident shareholders, these companies will also fall within the scope of the rules and be subject to the 2% surcharge.
Once again these changes apply increased complexity to SDLT legislation and compounds the various rates of SDLT. In addition, off the back of the recent SDLT holiday, it will create an even greater cliff-edge in respect of the SDLT payable in the residential market, with an urgency for transactions to be completed prior to 31 March 2021.
For more information on how Crowe can help with SDLT, please contact Caroline Fleet or your usual Crowe contact.