UK Stamp Duty Land Tax Rules For Non-Residents

The introduction of the stamp duty land tax (SDLT) surcharge of 2% in April 2021 has seen reports of overseas buyers changing how they structure property deals to get around the rules, consequently taking advantage of how the legislation is drafted.

Nationality, citizenship, and residence status, such as under the UK statutory residence test (SRT), which applies for many taxes, are all irrelevant in determining whether or not the surcharge applies for a non-UK resident purchaser.

The key rules to be aware of are:

Individuals
Individuals are non-UK residents if they are not present in the UK (including Scotland and Wales) for at least 183 days during the 24 months on either side of the ‘effective date’. If someone has spent more than half of the previous year outside of the UK due to circumstances outside of their control, they could still be hit with the additional surcharge liability. An example is the COVID-19 pandemic that has closed some borders and individuals not returning from overseas.

Companies
If a company is not a UK resident for corporation tax purposes, they will also be classed as non-UK resident for SDLT purposes.

Trusts
Residence status is determined by the beneficiaries for bare and life interest trusts or trusts where an entitlement to income exists. For other trusts, the trustees determine the status, whereby if any trustee is a non-UK resident, then the trust is a non-UK resident, and the surcharge will be applicable. If you are thinking of an investment property and would like to understand your Tax position with greater clarity, contact Corestone for more information.

Capital Gains Tax Changes

HMRC have released official figures relating to UK capital gains tax (CGT) paid on the sale of investments and second homes.

For the 2019-20 tax year, the government collected a record of £9.9 billion (3% increase from the previous tax year) worth of CGT on £65.8 billion of gains from 265,000 taxpayers (6% decrease from last tax year). The decrease in the numbers of individuals and trusts paying CGT might indicate that people are hanging on to their investments during this period of uncertainty. The timing of when a gain is realized is therefore being held at the individual’s discretion.

Despite a previously issued report by the Office of Tax Simplification (OTS), which suggests that a review of the relief is required, no changes have been proposed to CGT. Some also believe a complete overall reform is well overdue because introducing wealth or COVID recovery tax is unlikely.

Considering the total UK CGT taxpayers represent less than 0.005% of the UK population, any tax reform would not upset that many people if it were changed. Government figures estimate that CGT is forecast to rise over the next five years, reaching £14.4billion in 2025-26.

With many of the critical decisions that you take, we feel that appropriate tax advice is necessary wherever you are based.

The information contained within this update has been kindly supplied by RL360, an investment partnership based in the Isle of Man.

The information contained within this brief does not constitute financial advice. If you have a potential situation that directly relates to one of the above taxes, please get in touch with us to find out how we may be able to assist you.

 

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