In March this year we reported that the government had published details of its proposal to introduce a 1% Stamp Duty Land Tax (“SDLT”) ‘surcharge’ on foreign purchasers of residential property in England and Northern Ireland. The consultation did not give any details as to when the surcharge would come into force, although the timing of the consultation suggested that it would be made law in either late 2019 or early 2020, with draft legislation published in the meantime.
Theresa May’s government announced that it was considering responses to the consultation, and that it would not be publishing draft legislation on the measure just yet. Instead the government confirmed that it would be legislated for “in a future Finance Bill”, stopping short of confirming when this might be.
This is not a step we would have anticipated the government taking, the measure being the latest in a series in recent years targeting foreign property owners. Our suspicions though is that the government simply has not had the time to consider responses to the consultation, chiefly as a consequence of the protracted Brexit negotiations. The fallout from this has seen the resignation of Theresa May as Prime Minister and the appointment of Boris Johnson as her successor, after a well-documented leadership campaign. Many other government proposals have suffered the same fate.
Whether the surcharge will become law is now even less certain following Boris Johnson’s appointment as Prime Minister. Mr Johnson has made it clear that he has a widespread reform of SDLT in his sights as part of his manifesto for office, and it is likely Mrs May’s surcharge proposal will get swept up with this larger scale reform.
Whether Mr Johnson gets chance to focus his attention on SDLT reform will depend in part on whether he can survive as PM beyond 31 October when the UK is due to leave the UK. A loss of confidence in the government and a snap General Election could see Jeremy Corbyn’s Labour Party form a government (either by majority or in coalition). A Labour government is likely to signal a wider ranging reform of property taxation as well as other taxes and we will be covering some of the Labour party’s proposed policies in a separate article.
It is very easy to jump ahead of ourselves but in the short term foreign buyers of UK property should proceed on the basis they will not be subject to any additional SDLT charges, compared to their domestic counterparts. This is the case at least until the government makes any further announcements, whatever its political persuasion at the time.