ICAS responds to the consultation on the proposed SDLT non-UK resident surcharge

By Susan Cattell, ICAS Head of Tax Technical Policy

30 May 2019

Susan Cattell outlines the ICAS response which includes some suggestions for improvements.

Why is the government planning to introduce a surcharge?

It is part of the government’s plans to help more people into home ownership. The consultation refers to evidence that property purchases by non-UK residents are pushing up house prices for UK residents.

Is there an alternative?

Possible alternatives to the surcharge are not discussed in the consultation but the ICAS response suggested that consideration should perhaps be given to whether the government’s objectives could be achieved by other means.

Scotland applies LBTT rather than SDLT to property purchases: the Scottish government has apparently chosen not to impose a non-resident LBTT surcharge – but has instead increased the rate of the LBTT Additional Dwellings Supplement from 3% to 4%.

This option would also be available to the UK government which already applies a similar SDLT surcharge to purchases of additional residential properties. Increasing an existing levy, which has similar objectives, avoids the need for a complex new surcharge with completely different rules.

How would it work?

The surcharge is intended to apply to purchases of residential properties in England and Northern Ireland by non-resident individuals and other non-residents (including companies, trusts and partnerships). The proposed rate will be 1% on top of existing SDLT rates and will apply to freehold and leasehold purchases.

Stakeholder meeting

Susan Cattell attended a useful stakeholder meeting to discuss the consultation with the lead officials from HMRC and HMT.

Issues raised in the ICAS response:


The consultation proposes the introduction of a new residence test for the purpose of the surcharge; this is relatively simple, and the consultation explains why the government believes that the existing Statutory Residence Test (SRT) cannot be used.

Nevertheless, the introduction of a new test, rather than using an existing one, inevitably adds to the complexity and is likely to cause confusion. It also raises the risk of unfair outcomes due to a mismatch between the SDLT surcharge test and the SRT – with individuals potentially being non-resident for the purposes of paying the surcharge but then treated as a resident for other tax purposes under the SRT.

The government does not want to deter individuals from coming to the UK to live and work. It, therefore, proposes that refunds of the surcharge will be available to individuals, where certain conditions are met. The ICAS response suggests some amendments to the proposed conditions to minimise the consequences of mismatches with the SRT


The proposals for partnerships are not appropriate in their current form. Large partnerships of, say, 40 or 50 partners will be treated as non-resident for the purposes of the surcharge if one of the partners is non-resident. This is disproportionate and would not usually reflect the substance of the partnership.

The proposals will also be onerous and potentially completely impractical for some large partnerships, which would need to ascertain details about days spent in the UK, from every individual partner at the date of every relevant purchase. In the case of a property investment partnership with 40 or 50 partners, there could be as many as 40 purchases in a year.

ICAS suggested several improvements – full details can be found in the response. The main suggestion is that a partnership should be treated as UK resident if the majority of the partners are UK resident. This would be determined by looking at the underlying entitlements of the partners – with entitlement relating to capital contributions. A partnership would, therefore, be treated as UK resident if UK resident partners collectively had made more than 50% of capital contributions at the date of the relevant property purchase.


ICAS agreed with the proposal that the residence test for companies should be based on the existing tests for company residence in Chapter 3 of Part 2 CTA 2009. These tests are long-standing and will be familiar to companies and their advisers.

However, applying the tests (particularly central management and control) at the date of the transaction could present problems; it would be preferable to determine residence by reference to the accounting period in which the transaction takes place.

It is also possible for companies to be dual resident in different jurisdictions – in some of these cases residence may, therefore, be determined under a tie-breaker provision in one of the UK’s double tax treaties.  This will cover taxes other than SDLT – often CT and IT - and raises the possibility of a mismatch between residence for the purposes of the SDLT surcharge and residence for other taxes.

ICAS, therefore, suggested that where a tie-breaker clause is used to determine the company’s residence for other taxes, the company’s residence so determined should also be used for the purposes of the SDLT surcharge.

Other aspects

ICAS also commented on:

  • the proposals relating to trustees;
  • possible relief for employees sent on overseas secondments by their employers; and
  • the proposals for collective enfranchisement.

Let us know what you think

The ICAS tax team welcomes members’ views on current tax consultations to assist in preparing ICAS responses. If you have any comments let us know.

Details of current consultations on tax issues can be found here:


  • Tax

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