Globally Speaking | February 19, 2019

Government publishes consultation on proposed SDLT surcharge for foreign residential property purchasers

On 11 February 2019, the government published details of its proposed 1% Stamp Duty Land Tax (“SDLT“) ‘surcharge’ for foreign purchasers of residential property in England and Northern Ireland. The Prime Minister, Theresa May, first mooted the idea of the surcharge in autumn 2018 as a way of tackling some of the challenges faced by UK residents in getting on the housing ladder. In this article we highlight some of the key points in relation to the proposed surcharge arising from the consultation document.

  • Who is a foreign purchaser for the purposes of the surcharge?

Non-UK resident individuals and non-natural persons (including companies, trusts and partnerships) purchasing residential property (freehold or leasehold) in England and Northern Ireland.

The surcharge is proposed to apply to the purchase of properties in England and Northern Ireland only (Scotland and Wales having their own equivalent SDLT charges) but note that residence in any part of the UK (including Wales and Scotland) is relevant when determining eligibility for the surcharge.

  • Who qualifies as a ‘non-resident’ individual?

The government is proposing a simplified test of residence to determine whether an individual is a “non-resident” purchaser as compared to the statutory residence test which is used to determine residence status for income and capital gains tax (CGT).

Under the proposed surcharge test, anyone who spends fewer than 183 days in the UK in the twelve months ending with the date on which the property transaction (i.e. the purchase) occurs would be classified as “non-resident”. The government says that this test “is intended to be as simple as possible … in recognition of the fact that most people buying homes will not use a professional tax adviser.”

  • How will non-UK resident individuals moving to the UK be treated?

It is proposed that non-UK resident individuals moving to the UK be subject to the surcharge.  However the government is proposing that affected individuals will be able to claim a refund for the additional 1% if they are in the UK for 183 or more days in the twelve months following the date of the purchase of the property. 

  • How will the residence status of companies be determined?

There is currently no concept of corporate residence within the SDLT rules so the government proposes introducing a test in order to determine liability to the surcharge. This is to borrow largely from the test of company residence used for corporation tax purposes.

If a company is non-UK resident under this test it will be treated as a non-UK resident purchaser and will be subject to the surcharge. In the case of a UK resident company with non-UK resident participants, the company will be treated as non-UK resident  and liable to the surcharge. 

  • How will the surcharge interact with existing SDLT reliefs and rules?

The government’s intention is that the surcharge will apply on top of the existing SDLT rules and existing tax rates which apply to the purchase of residential property. In most cases this means that existing SDLT reliefs (i.e. multiple dwellings relief) and specific rules (i.e. those in relation to mixed use transactions and purchases of six or more dwellings) will continue to be available.  The surcharge does not extend to the purchase of non-residential (i.e. commercial) property and land.

  • How will joint purchasers be treated?

If a property is jointly purchased, it is proposed that all purchasers must be UK resident otherwise the surcharge will be levied. This means that affected joint purchasers will need to carefully consider who buys a property where, for example, one half of a married couple spends at least half of the year outside of the UK for work.

  • When will the surcharge take effect?

The Consultation does not give any details about when the proposed surcharge will come into force. However, it is expected to be made law in either late 2019 or early 2020.


  • The SDLT rules have undergone extensive reform since 2012 following the introduction of the 15% rate for purchases of residential property worth more than £500,000 (originally £2m when introduced) by non-UK companies.  Many of these changes were announced and imposed almost immediately without consultation. This latest proposal represents somewhat of a departure from this pattern with a full consultation period and no indication at this stage as to when the surcharge might come into force.  This is perhaps more indicative of the complexity of seeking to impose a specific charge on foreign buyers.
  • We believe that much of the difficulty is going to centre around who qualifies as a “non-resident” buyer.  Focussing on residence is an obvious solution but attempting to adopt a separate simplified residence test may paradoxically lead to confusion and complexity for taxpayers.  Foreign buyers could be in a position where they are UK resident for income and CGT purposes but non-UK resident for SDLT purposes and  vice versa.  
  • Another issue the consultation fails to address is its interaction with EU law and whether such an attempt to impose a surcharge on foreign purchasers (including those from the EU) as opposed to their UK resident counterparts is discriminatory. It remains to be seen how this point is to be played out in practice although with the consultation not closing until 6 May 2019 and legislation not following until later this year or early next, it may well be an issue the government can more easily circumvent post-Brexit.
  • Relatedly, the proposed surcharge is somewhat at odds with the government’s stated post-Brexit objective of continuing to attract foreign investment in the UK. The government will be conscious of the need to balance this message against supporting UK resident potential home-buyers. This area may well be picked up on in the responses to the consultation.