Cornerstone Tax: 2% non-resident SDLT surcharge needs a Covid test

When the non-resident SDLT surcharge was first mooted in 2019 a consultation was undertaken by the Government over what the legislation should look like and, indeed, whether it was a good idea.

The response to this consultation was widespread and included all the major Professional Institutes.

However, in collating responses the CIOT rejected suggestions by some that that representations on the new surcharge needed to include an allowance for people who were detained overseas for unavoidable reasons – the “banged up abroad” exception.

Dial forward two years and how reasonable and sensible that now sounds… some UK citizens have been “locked down” behind closed borders in many countries and will be liable to the 2% surcharge if they purchase a new home now or, indeed, within the six months from their, as yet uncertain, date of return.

What is particularly unfair is that the Statutory Residence Test for Income Tax has been updated to take into account Covid-19 so that:

“- Where an individual follows official government advice not to travel from the U.K. as a result of the virus;

“- Where an individual is unable to leave the U.K. as a result of the closure of international borders;

“-  Where an individual is self-isolating in line with government advice;

“-  Where an individual is required to come to the U.K. to support a vulnerable family member who has been asked to ‘shield’ or ‘self-isolate’, but the individual must be able to demonstrate why it is necessary for him or her to come and remain in the U.K. to provide support.

“HMRC adds that for exceptional circumstances to apply, the individual must be able to demonstrate that his/her presence in the U.K. is beyond his/her control, he/she is prevented from leaving the U.K., and he/she has made every effort to leave once the relevant restrictions have been lifted.”

And as a result, are not liable to UK Income Tax if they otherwise would not have been.

The 2% surcharge is already impacting returning expats and without an exceptional circumstances rule is likely to impact many unintended victims.

The Chancellor needs to amend the draft legislation to ensure that Britons who are unavoidably detained are not unfairly impacted by being “banged up” abroad.


Written by David Hannah, Chief Consultant at Cornerstone Tax


Kindly shared by Cornerstone Tax

Main article photograph courtesy of Pixabay