Non-UK resident SDLT surcharge: Considerations for overseas off-plan buyers. 

Following changes to the law in April 2021 non-UK residents purchasing residential property within England and Northern Ireland are liable to pay a 2% Stamp Duty Land Tax (SDLT) surcharge when their effective completion date is on or after 1 April 2021. The change will now be of particular relevance to non-UK residents, purchasing off-plan property, who exchanged some time ago and are now due to complete or considering variations to their contract.

Anybody who exchanged on property some time ago, most likely off-plan, should consult with their conveyancer as to which rules will apply to them for their purchase.

Who does the surcharge apply to?

Non-UK Resident Status:

Those who are resident in the UK are not subject to the 2% surcharge which begs the question, who is classed as a UK resident for SDLT purposes and who is not? It is a little more complex than you may think. Those classed as UK residents for SDLT purposes must:

• reside within the UK for a minimum of 183 days;
• the 183 days must be a continuous period; and
• these 183 days must be within the two year period surrounding completion of the transaction. This two year period begins 364 days before completion of the transaction and ends 365 days after it.

Those purchasers who do not meet the requirements prescribed above will be classed as non-UK residents for SDLT purposes and will be liable to pay the surcharge, except in specific circumstances. Further information regarding who is classed as a non-UK resident can be found on the government website by clicking here. 

Which transactions are not subject to the non-UK resident surcharge?

According to the relevant regulations, non-UK resident buyers will not be liable to pay the 2% surcharge when purchasing within England and Northern Ireland in the following circumstances:

• if the contract has been entered into and substantially performed (i.e. completed) before the 1 April 2021; or
• if the contract has been entered into before 11 March 2020, unless it is classed as an “Excluded Transaction” under the relevant regulations.

Unless a transaction is classed as an Excluded Transaction purchasers of off plan property who exchanged contracts before 11 March 2020 will not be liable to pay the SDLT surcharge. Find out more about excluded transactions below.

Which transactions are Excluded Transactions?

If a contract has been entered into before 11 March 2020 but the transaction is classed as an Excluded Transaction, non-UK residents will still be subject to the surcharge.

Transactions are considered to be Excluded Transactions in the following circumstances:

• if on or after 11 March 2020 there is any variation of the contract, or assignment of rights under the contract;
• if any option, right of pre-emption or similar right exercised on or after 11 March 2020 consequentially effects the transaction; or
• if on or after the 11 March 2020 an assignment, sub-sale or other transaction relating to the whole or part of the contract results in a party other than the original purchaser under the contract becoming entitled to call for a transfer of property.

Certain small changes to contracts such as to the contractual completion date or a prescribed colour scheme may not amount to a variation of contract however more significant changes may. Examples of a variation of contract include (but are not limited to) a change to:

• the dwelling being purchased;
• the parties to the contract;
• the contractual consideration; and
• the term length of a lease

Purchasers of off-plan property should bare this mind when considering whether to make any changes to their contract as substantial changes may result in the 2% surcharge becoming payable.

As such purchasers of off-plan property who exchanged before 11 March 2020 and may be considering making changes to their contract should be aware of the circumstances in which a transaction becomes an Excluded Transaction and consort with their conveyancer before making any decisions.

Find out more  

Navigating the regulations surrounding SDLT can be tricky and a buyer should always consult with their instructed conveyancer who can help to understand the relevant SDLT liability.

You can find out further information regarding the non-UK resident SDLT surcharge by clicking here to visit the government website and for information regarding the current SDLT rates please click here.