However, the Treasury has made some tweaks to how the policy will be implemented particularly for spouses and civil partners where one is resident and the other is living abroad.
The government closed its consultation on the plans for the two per cent additional levy in May 2019, but is only now publishing its results and response.
Seventy-eight responses including from professional firms, developers and estate agents were received and meetings with a variety of stakeholders were also held to understand views on the proposed surcharge.
Off-plan and build to rent
According to HMT, several respondents argued non-UK resident purchasers buying off-plan should be excluded from the additional tax to reflect their role in the development funding process.
They also believed this should apply to build-to-rent developers, and for those who are currently subject to the Annual Tax on Enveloped Dwellings (ATED) or the flat 15 per cent rate of stamp duty on purchases over £500,000, such as those who let a property commercially.
However, these arguments were firmly rejected.
“The government does not believe that any reliefs would be compatible with the overall policy objective of making house prices more affordable,” the government response said.
“It was noted by several respondents to the consultation that purchases by non-UK residents are based on multiple factors, such as exchange rates and the global property market, alongside any Stamp Duty Land Tax (SDLT) due.”
Many respondents considered the proposed rules on joint purchasers to be unfair and distortionary with regard to married couples and those in civil partnerships.
They highlighted this where a couple is buying a house together with one spouse in the UK and the other working abroad.
As a result of these concerns, HMT said the surcharge will not apply where one spouse is resident under the SDLT residence test and where those spouses or civil partners jointly purchase a property.
However, for other joint purchasers, the current joint purchaser rules in SDLT will continue to apply.
Deciding the residence of trusts has also been changed and the residence status of a trustee will be determined using the relevant SDLT residence test.
Where there are multiple trustees, all the trustees must be UK-resident under the SDLT tests to not need to pay the surcharge.
Transactions in progress
Transitional arrangements will be applied for transactions already in progress.
“Broadly, transactions will not be subject to the surcharge where contracts were exchanged on or before 10 March 2020 but are not completed or substantially performed until 1 April 2021 or thereafter,” HMT said.
However, there are exclusions to this where certain changes in ownership or entitlement are made on or after 11 March 2020.
In conclusion, HM Treasury said: “The government believes that a two per cent surcharge strikes the right balance between being high enough to have a material impact on house prices, thereby helping residents get onto and move up the housing ladder, and the UK remaining an open and dynamic economy that welcomes inward investment.”