The new UK SDLT surcharge: are you a non-resident purchaser?

25 January 2021 | Applicable law: England and Wales

On 1 April 2021, the Conservative government will implement a new stamp duty land tax ('SDLT'') surcharge of 2%, known as the non-resident surcharge ('NRS'), after raising the idea in the Autumn 2018 Budget and committing to it in their 2019 manifesto.  The NRS will only apply to acquisitions of residential property in England and Northern Ireland made by 'non-resident' purchasers, the first time a residence element has been introduced into the SDLT rules.  

With the top SDLT rate currently at 12% (on the amount of the purchase price exceeding £1.5m) and a possible surcharge of 3% applying on purchases of second or additional homes, the highest possible SDLT rate now stands at 17%.  Certain non-resident corporate purchasers will also now pay 17% SDLT at a flat rate on the whole purchase price.

While certain transactions will avoid the surcharge (such as acquisitions of leases of 21 years or less or acquisitions made by REITS and OEICs), many typical residential property acquisitions by non-resident purchasers (and even some by UK resident purchasers) will be affected. Importantly, where there are multiple purchasers, the whole transaction will be subject to the NRS if just one of the purchasers is non-resident. An exception to this applies where UK and non-UK spouses or civil partners are buying a property together, as the non-UK resident party is treated as UK resident.

So who or what is a non-resident purchaser? The answer is not always straightforward and advice should be taken as the results of these new rules can be unexpected. We set out in overview below how the non-resident purchaser test works in the case of individuals, trusts and companies.


Many of our readers will be familiar with the Statutory Residence Test ('SRT') which individuals have used since 2013 to determine whether they are tax resident in the UK in a given tax year. The NRS rules introduce an entirely new and separate set of tests to determine an individual's residence for SDLT purposes, and the contrast between these two systems leads to the possibility that an individual is resident for the purposes of one test and non-resident for the purposes of the other. So, an individual could be UK tax resident under the SRT in the tax year in which he buys a residential property, and yet still be a non-resident purchaser subject to the NRS.

For an individual purchasing a property in their own name (including through a bare trust or nominee arrangement) or for a beneficiary of a trust who is entitled to the income earned by the property, the non-resident purchaser test is relatively straightforward. The question is whether the individual is present in the UK on 183 days during a continuous year within a longer two-year window centred around the 'effective date' (the effective date is likely to be completion of the purchase, although that is not always the case). Put differently, there is a two-year window looking backwards one year and forwards one year from the effective date. The individual needs to find a single continuous year within that window during which they were present in the UK for 183 days (not necessarily consecutively).

Of course, if the individual cannot look backwards and find those 183 days then they will need to pay the surcharge upfront, but can have it refunded if in the future they reach 183 days within the relevant period. To receive a refund, the individual will need to amend their SDLT return within two years and a day of the effective date.

So far, so good

However, the test for individuals is more restrictive in certain circumstances, such as when the individual acts as a trustee of a discretionary trust, partner in a partnership or shareholder in a company. In those cases, the individual can only look backwards one year to find 183 days in the UK, not forwards.


The deeming provision that treats a transaction as subject to the NRS where one of the purchasers is non-resident can lead to counter-intuitive results in a trust context. For example, a settlement whose trustees are a mixture of UK resident and non-UK resident individuals (under the SRT) may, under ordinary principles, still be UK resident. However, under the NRS rules, a single non-resident trustee (under the more restrictive NRS test above) will cause the trust to be subject to the 2% surcharge.


The test for companies is more complicated and could raise a number of problems, in particular in the case of companies with both UK and non-UK resident shareholders.

It will come as no surprise that companies which are non-UK resident for corporation tax purposes are non-resident purchasers for NRS purposes.

However, what is surprising is that companies that are resident for UK corporation tax purposes can still be non-resident purchasers, if they are deemed to be controlled by non-UK resident individuals. The inconsistent positions can arise for companies because the test of control (and residence) for NRS purposes is completely different from what constitutes control for the purposes of determining the location of a company's 'mind and management' and hence its residence for UK corporation tax purposes.

Leaving aside special cases not covered here, a company which is UK resident for corporation tax purposes will be a non-resident purchaser if it is a close company and meets the 'non-UK control test'. A close company is, very broadly, one which is controlled by five or fewer participators (a term which covers shareholders, among other things) or is controlled by any number of participators who are also directors. 'Control', broadly again, is defined primarily by reference to the right to have the greater part of a company's share capital, voting power or income, or the greater part of its assets on a winding up. It must be remembered that such rights can be attributed to a participator even if that participator does not actually hold them, for example because the rights are held by the participator's relative. This is a trap worth bearing in mind.

That leaves the 'non-UK control test'. Very briefly, if any number of non-resident participators control the company, then it will be non-UK controlled. The residence of the participators is determined using the modified test for individuals set out above, where the individual can only look backwards, not forwards, to find 183 days in the UK.

To give an example of a counter-intuitive result of applying these tests, consider a family investment company whose shares are owned by three siblings and their respective offspring. If the participators are treated as related, the rights of the UK resident participators are attributed to any non-UK resident participator, with the result that a minority participator who is treated as non-UK resident under the restricted test for individuals can be deemed to have control of the company. Consequently, the company will be a non-resident purchaser and therefore subject to the NRS, regardless of how small the non-resident's shareholding is.

In summary…

The new rules are more elaborate than we have space to set out here. The key message is to be aware of their existence and know to seek advice when there is a question mark over whether your purchaser is non-resident.

Our private client and private property teams will help you navigate the UK tax rules and real estate market and can advise on appropriate structuring options for non-resident purchasers of all kinds.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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