Legal warning over little-known stamp duty technicality

There’s been a huge focus on both the stamp duty holiday and Help To Buy deadlines at the end of March - but a legal firm is warning there’s a third cliff edge which could threaten a small sector fo the housing market.

UK non-residents buying residential property face a sharp increase in stamp duty from April - that’s in addition to the end of the duty holiday.

Natasha Heron, tax manager at the accountancy firm Hillier Hopkins explains: “The government will from April 1 charge UK non-residents a two per cent SDLT surcharge on all residential property. This means on property under £125,000 where a UK resident would pay no stamp duty, a UK-non-resident would pay two per cent on the sale value. On properties over £1.5m, this increases to 14 per cent. HMRC will also require stamp duty to be paid with 14 working days.”

She says UK non-resident buyers will also need to look closely at the residency rules relating to SDLT as they differ from residency rules applying to other taxes. 

This, warns Heron, is likely to catch buyers unawares as a result of the fall in international travel as a result of the ongoing global COVID pandemic.

“The residency test for individuals looks back 12 months from the date of purchase and with the buyer considered a non-UK resident if they are not present in the UK for at least 183 days in that 12-month window.

“Confusingly, an individual may not be considered UK resident on a personal tax basis but could be considered a UK resident for SDLT purposes. This may catch buyers out as residential conveyancing solicitors do not always fully appreciate the technicalities surrounding SDLT. It is recommended that specialist advice is taken.

“Individual buyers may be able to claim a refund after the purchase if they are present in the UK for at least 183 days in a two-year window beginning a year before the purchase and a year after the purchase. Crown employees and their spouses may also claim an up-front relief from this tax.”

Meanwhile Coutts, the wealth manager and private bank, says foreign investors are likely to ramp up the pressure to complete on properties before the end of March when that two per cent stamp duty surcharge kicks in for non-resident purchasers.

That deadline - alongside the stamp duty holiday cliff edge - has led to a position where across prime London there are 16.2 per cent more units under offer now compared to a year ago, says the bank.