A proposed increase in stamp duty for non-UK residents buying residential property in the UK will have an impact beyond its intended target of foreign investors and may affect couples, according to tax experts.
The Association of Taxation Technicians (ATT) says in its response to the HMRC consultation on extra tax for overseas buyers that the move is not in line with the aim of helping British people get on the housing ladder.
The consultation proposes that non-UK residents purchasing residential property in England or Northern Ireland will be charged an additional 1% stamp duty. A final date for the introduction of the extra charge is yet to be confirmed. The objective of the measure, according to the consultation document, is to help control house price inflation and assist UK residents to get on the housing ladder.
‘We are concerned that the proposal will have an impact beyond non-UK resident investors, and is not in line with the policy aim of helping UK residents to get on the housing ladder,’ said Michael Steed, co-chair of ATT’s Technical Steering Group.
‘Under the proposal, the additional rate will apply to joint purchases of property if either of the purchasers are non-UK resident. This means that the measure will affect couples who wish to purchase a house together in the UK, with one of them intending to live in it immediately but the other currently living or working abroad,’ he explained.
‘In addition, a couple who currently own a home in the UK, but where one party already works abroad, will be affected if they move house and the non-resident spouse remains working overseas. While they could avoid the issue by buying only in the name of the UK resident spouse, this may not be practical for mortgage purposes nor be what the couple wish,’ he pointed out.
‘Individuals looking to return to the UK who acquire property more than six months in advance of their return will also be unable to obtain a refund of the extra stamp duty that they had been required to pay,’ he added.
The ATT is also concerned that the measure proposes the use of a different residency test to that used for income tax purposes. Having two separate residency tests will both introduce further complexity and cause confusion, since it is possible that an individual could be resident for income tax purposes but not for stamp duty purposes.
The ATT questions whether it is reasonable that an individual who is resident for income tax purposes should pay the higher stamp duty charge.