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Overseas stamp duty surcharge ‘should not act as a barrier’ – HM Treasury

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  • 11/02/2019
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Overseas stamp duty surcharge ‘should not act as a barrier’ – HM Treasury
The government hopes its 1% stamp duty surcharge for overseas property investors will not deter anybody coming to live and work in the UK.

 

As part of the plans, anyone who spends more than 183 days of the year after the property purchase in the UK will be eligible for a refund, HM Treasury revealed.

It added that it wanted to keep the residency test as simple as possible as it was aware most people buying homes would not be using a professional tax adviser.

Proceeds of the surcharge will be put towards measures to tackle rough sleeping, with further details on how much the charge is expected to raise being published after the consultation.

 

183 days in the UK

The consultation launched today, explained that the surcharge will apply to any person who is non-resident in the UK, including certain UK-resident companies which are controlled by overseas shareholders.

It will apply to freehold and leasehold purchases of residential property and will be at a rate of 1% on top of all existing stamp duty rates, including the those applicable to the rental element of leasehold property.

However, crown employees working abroad – such as military service personnel – will not have to pay the surcharge at all.

For the surcharge, the government is proposing to treat individuals as non-UK resident if they spent fewer than 183 days in the UK in the 12 months ending with the date the transaction occurs.

 

Refunds available

Meanwhile, the government said it “does not want the surcharge to act as a barrier to anybody coming to live and work in the UK”.

Therefore, it is proposing that if individuals who have paid the surcharge spend 183 days or more in the UK in the 12 months following the effective transaction date, they will be eligible for a refund.

Financial secretary to the Treasury Mel Stride, added: “The UK is and will remain an open and dynamic economy, but some evidence shows that non-UK resident buyers of UK property could be inflating house prices.

“A 1% surcharge could help more people own their own homes in the future, and its proceeds will go towards tackling rough sleeping, boosting our plan to halve the numbers of rough sleepers by 2022.”

The surcharge was originally proposed by prime minister Theresa May at the Conservative party conference and later confirmed at 1% by chancellor Philip Hammond in the Budget 2018.

 

Popular policy

Intrinsic managing director Gemma Harle noted that some might say the policy signals that the UK is not open for business.

“However, the 1% surcharge is unlikely to impact investor sentiment too much and is a simple mechanism to increase funding for the growing homeless population,” she said.

“During this politically bruising period, this consultation is likely to be the first step in creating a policy which is well liked and will garner a fair bit of cross-party support.”

Harle added that the consultation highlighted that the best way to stabilise and improve affordability in the housing market is quite simply to build more housing.

“Similarly, more policies which incentivise people to downsize might free up existing housing further down the chain and give first-time buyers a better chance of getting their first foot on the housing ladder could be crucial in getting more people out of rented accommodation and into their own home,” she said.

 

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