SDLTM09950 | SDLT - increased rates for non-resident transactions: Alternative property finance - para 16 Sch 9A FA03

(All legislative references are to Sch 9A FA03 unless otherwise stated)

General guidance on alternative property finance can be found at SDLTM28000 onwards.

For the purposes of the surcharge, where the purchaser is a financial institution and the chargeable transaction is part of an alternative property finance scheme falling within section 71A(1)(a) or 73(1)(a)(i) of FA 2003, the residence of the financial institution in relation to the chargeable transaction is determined by applying the appropriate residence test to the person taking out the finance, i.e. the person mentioned in section 71A(1) FA03 (paragraph 16(2)) or section 73(1) FA03 (paragraph 16(4)).

Example 1

Aya enters into alternative financing arrangements with Strix Corporation (a financial institution), whereby Strix Corporation purchases a freehold residential property in Northern Ireland on 1 September 2022 for £400,000 (Transaction 1), and sells it to Aya for £500,000 (Transaction 2).

Aya agrees to pay £500,000 to Strix Corporation over a period of 25 years, and grants a charge to Strix Corporation over the property. Strix Corporation is required to pay SDLT on Transaction 1. As Aya claims alternative property finance relief under section 73(1) FA03, Transaction 2 is exempt from charge.

For the purposes of the surcharge and Transaction 1, although Strix Corporation is the chargeable person, it is non-resident in relation to the transaction if and only if Aya is non-resident in relation to transaction. As Strix Corporation is a company, the residence test at paragraph 5(1) is used to determine Aya’s residence status in relation to the transaction.

Between 2 September 2021 and 1 September 2022, Aya spent 180 days in the UK. She is therefore non-resident in relation to the transaction, and hence, Strix Corporation is a non-resident purchaser in relation to the transaction.

Example 2

Rosalee enters into alternative financing arrangements with Qetsiyah Limited, (a financial institution), whereby Qetsiyah Limited purchases a freehold property in England on 31 December 2023 for £550,000 (Transaction 1). Qetsiyah Limited then grants a 25-year lease to Rosalee with rent payable of £24,200 per annum (Transaction 2), together with an option over the freehold.

Qetsiyah Limited is required to pay SDLT on Transaction 1. As Rosalee claims alternative property finance relief under section 71A(1) FA03, Transaction 2 is exempt from charge.

For the purposes of the surcharge and Transaction 1, although Qetsiyah Limited is the chargeable person, it is non-resident in relation to the transaction if and only if Rosalee is non-resident in relation to the transaction. As Qetsiyah Limited is a company, the residence test at paragraph 5(1) is used to determine Rosalee’s residence status in relation to the transactions.

Between 1 January 2023 and 31 December 2023, Rosalee spent 305 days in the UK. She is therefore resident in relation to the transaction, and hence Qetsiyah Limited is not liable to the surcharge.