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Consultation on higher SDLT rates for foreign buyers


The Government has proposed a new SDLT surcharge for foreign buyers of residential properties in England and Northern Ireland.

If the proposal is introduced, overseas buyers will have to pay an additional 1% of SDLT on top of whatever existing SDLT rates apply to their purchase. The new top rate of SDLT for a buyer caught by the proposed surcharge would therefore be 16%.

However, if the property being purchased is classified as non-residential or mixed-use for SDLT, then it appears that the surcharge would not apply. Instead, the purchase would benefit from the much lower non-residential SDLT rates of up to only 5% (as explained further here). For a £1m purchase, this could save more than £120,000, demonstrating how valuable it is for buyers to seek expert SDLT advice.

For those buyers who cannot reduce their SDLT bill by other means, the Government’s proposal would further increase the tax costs of investing in UK residential property. Internationally mobile buyers will already be aware that some other countries (such as Canada) have more penal property tax regimes for overseas buyers than the 1% SDLT increase proposed by the UK. It remains to be seen whether future UK Governments take those other countries’ lead and ramp up the surcharge over time.

For the time being, prospective overseas buyers of UK residential properties would be well advised to wait and see how the Government’s consultation plays out, as there is no guarantee that the surcharge will be introduced as proposed. Much will depend, for example, on the outcome of the Government’s Brexit negotiations. In the meantime, some of the main takeaways of the consultation are set out below.


  • Non-UK resident individuals would have to pay the new surcharge.
  • The UK has a complex residence test which is already used for most taxes. However, this would not be used for the proposed SDLT surcharge.
  • Instead, an individual will be non-UK resident for SDLT purposes if they have spent fewer than 183 days in the UK in the 12 months immediately preceding the date of completion. 
  • A person will be deemed to have spent a day in the UK if they are here at the end of a day (at midnight).
  • Where an individual who has been subject to the surcharge spends 183 days or more in the UK in the 12 months following completion of the transaction, they would be eligible for a refund of the surcharge.


  • Non-UK resident companies would have to pay the new surcharge.
  • As for individuals, the UK has an existing test for determining whether a company is UK resident. For companies, these existing UK corporate tax residence tests would be used for SDLT purposes.
  • Broadly, this means that companies will be UK resident only if they are incorporated in the UK, or managed and controlled from the UK. Other companies will be non-UK resident and therefore caught by the surcharge.
  • Even if a company is UK resident, the surcharge would nevertheless apply as if it was non-resident if:
    • the company is a family company, or under the control of a limited number of people, and
    • it is under the control of one or more non-UK residents.


  • Partnerships and LLPs would continue to be treated as transparent for SDLT purposes. This means that each partner’s liability for the new surcharge would depend on their own residence status, not that of the whole partnership.
  • Existing SDLT partnership rules will continue to apply. These can be complex and so great care should be taken to get the SDLT treatment right if a property is purchased by a partnership or LLP.


  • Trusts will be dealt with in largely the same way as they are for the additional 3% rates (see briefing notes here and here). Very broadly, this means that they would continue to be split into two categories:
    • bare trusts (which are generally nominee-type arrangements), and
    • settlements (which is any trust that is not a bare trust).
  • Bare trusts would continue to be “looked through” so that liability for SDLT rates is determined by reference to the beneficiary’s status, rather than the trustees’.
  • The SDLT position for settlements will depend on whether the terms of the trust entitle a beneficiary to occupy the property for life or receive income from it. If the beneficiary meets these conditions, then it is their residence status which is relevant; if not, the trust’s residence is relevant.
  • The residence of a trust is determined by reference to where the trustees are resident and the circumstances in which the trust arose (for example, where the settlor was resident).

Joint buyers

If a property is purchased jointly, then all the purchasers must be UK resident, otherwise the new surcharge would apply to the whole purchase price for all the purchasers.

Existing reliefs, including multiple dwellings relief, would continue to apply as normal.

If you require further information about anything covered in this briefing note, please contact James Bromley, or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, March 2019

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About the authors

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James Bromley

Senior Associate

James advises on a range of complex business and private tax matters. He helps clients with tax and structuring across the firm’s sectors, with a particular focus on real estate, entrepreneurial enterprises and family businesses.

James advises on a range of complex business and private tax matters. He helps clients with tax and structuring across the firm’s sectors, with a particular focus on real estate, entrepreneurial enterprises and family businesses.

Email James +44 (0)20 3375 7339
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