The measure was first announced as part of the Budget in November and is designed to target rising house prices, which the government believes is being driven in part by purchases of UK property by non-UK resident buyers. The proceeds of the new surcharge would be used on measures to tackle rough sleeping.
The government has published a consultation looking at all aspects of the proposed charge, including how non-residents will be defined and how it applies to companies. The consultation closes on 6 May 2019.
The consultation proposes an additional 1% surcharge on top of all existing SDLT rates, including freehold and leasehold purchases of residential property and the rates applicable to the rental element of leasehold property.
The charge would apply to non-UK resident individuals and companies, including certain UK-resident companies which are controlled by overseas shareholders. An exception would apply for UK military service personnel and other crown employees working overseas, while those who move to the UK after purchasing a residential property would be entitled to apply for a refund of the extra payment.
The consultation defines a non-UK resident individual as someone who has spent fewer than 183 days in the UK in the 12 months ending with the date the transaction occurs. An individual who spends more than 183 days in the UK in the 12 months following the transaction would be eligible for a refund.
The consultation also proposes a corporate residence test. Corporate purchasers would be treated as UK-resident for the purposes of the surcharge if they are incorporated in the UK, or their central management and control is exercised in the UK at the time that they acquire the residential property. Companies that do not meet these tests would be classed as non-resident, and therefore liable for the surcharge.
Property tax expert Richard Croker of Pinsent Masons, the law firm behind Out-Law.com, said that the proposed new rules added "another complication to the complexity of residential SDLT".
"All purchasers would now need to be vetted on their status as residents, in addition to the questions that already need to be raised about second homes etc. under the existing rules," he said.
"In Scotland, they simply increased the rate of the additional dwelling supplement (ADS) under the Land and Building Transaction Tax (LBTT) by 1% - a measure which would raise much the same, and is arguably less nationalistic," he said.