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We may have bid adieu to the much-reprieved SDLT holiday on the 30 June 2021, however, buyers will still benefit from reduced rates until the 30 September 2021, with a nil rate band of £250,000, and of course we welcome back first-time buyer relief.

Here, we briefly explore the 2% Non-Resident Surcharge (NRS) which was introduced from the 1 April 2021.

What is NRS?

NRS is 2% of the purchase price and only applies to the purchase of a dwelling or dwellings and turns on residence, not nationality.

You will have most likely noticed the introduction of three new questions on the SDLT1 Forms, which are compulsory for residential transactions:

• Are any of the purchasers non-UK resident?
• Are any of the purchasers a UK resident close company controlled directly or indirectly by a non-UK resident?
• Are you claiming Crown Employment Benefit? (If you are non-UK resident due to performing duties for the purposes of your employment under the Crown, NRS relief is available. This relief is also extended to the spouse or civil partner of a Crown servant, provided they are not separated).

Are you a non-resident?

For NRS purposes, a non-resident is a non-UK resident. The UK includes Great Britain (England, Wales & Scotland) and Northern Ireland.

An individual is a UK resident for the purposes of NRS if they have been present in the UK at least 183 days or more in the 12 months before the completion date of the purchase. The 183 days do not have to be continuous, but those 183 days must all fall within 365 consecutive days. If one is present in the UK at the end of a day (midnight), then that day counts.

UK resident close company controlled by non-UK resident

A company is non-resident if either of the below conditions are met on the completion date:

• Not UK resident for Corporation Tax purposes.
• A close company which meets the non-UK control test and is not an excluded company.

Most private companies are close companies, and the meaning of one can be found here, where the non-UK control test is also explained.

If any participator in the company who has control, or to whom control is attributed, has not been resident in the UK on at least 183 midnights in the 365 days preceding the completion date, then the company is non-resident.

Control is defined in the Corporation Tax Act 2010 (s. 448, 450 & 451) as an individual who exercises, is able to exercise or is entitled to acquire direct or indirect control over the company’s affairs (more than 50%). Under s.451, the individual’s rights and powers may be attributed to an ‘associate’, which is defined in s.448. For NRS purposes, however, there are changes to the normal attribution rules:

• There is no attribution between business partners, or between spouses or civil partners, as there usually is.
• A de minimis rule prevents attribution of rights and powers in a company where the associate holds less than 5%.

Reclaims for Individuals

Individuals have a respite over corporate bodies in that they may be able to reclaim NRS if they become UK resident after paying the surcharge on completion.  Therefore, if the individual can show 183 days UK residence within the following 365 days after completion, NRS may be reclaimed by submitting an amended return during a 2-year period from the completion date.

However, if the purchasers are joint purchasers, and just one of them is non-resident, NRS is payable. The exemption to this is where the purchasers are married or civil partners and living together for tax purposes – in this case, if one of the individuals is UK resident but the other is not, NRS is not payable. Please note, the rules differ for trustees of a settlement.

SDLT and the NRS rules are a complicated area of tax, therefore, please seek advice from a tax specialist if you are unsure and require assistance.

If you would like to discuss this or any other property law related query, please do not hesitate to contact our team here at Aston Bond.

A Legionella Risk Assessment assesses the potential risks of the spread of Legionella bacteria within properties. 

The Legionella bacteria causes a pneumonia like illness known as Legionnaires’ disease and can contaminate and thrive in water systems, such as the hot and cold-water systems within properties. 

Under health and safety law, landlords have a duty to ensure their tenants are not exposed to any health and safety risks. This includes exposure to Legionella bacteria and landlords should ensure they assess the risk of exposure within their properties.

Whilst large and complex water systems may require routine testing, this is often not considered necessary for simple domestic water systems found in most residential properties.

Usually a landlord can comply with this duty by carrying out a Legionella Risk Assessment themselves, without needing to employ a consultant to carry out a risk assessment for them. Landlords should ensure that their Legionella Risk Assessment is kept up to date and is periodically reviewed. 

On 8 June 2020, the Chancellor, Rishi Sunak, announced his mini budget that included a temporary raise in the Stamp Duty Land Tax (SDLT) threshold.

Previously, the threshold for paying SDLT was £125,000, although first time buyers benefited from a higher threshold of £300,000.

Under the new measures, the threshold is raised to £500,000. This means that anyone buying a property will not pay any SDLT on the first £500,000 of the purchase price/transfer value. 

This temporary change came into effect immediately and will remain in effect until 31 March 2021.

During this period, SDLT liability will be calculated as follows:

The above rates apply to first time buyers and those replacing their main residence.

Whilst anyone purchasing an additional property will still benefit from the increased SDLT threshold, the 3% high rate will still apply on the revised standard rates.

This means the rates for anyone purchasing additional properties are:

On 19 June 2020, the government published the ‘Code of Practice for commercial property relationships during the Covid-19 pandemic’.

Whilst the Code is voluntary, it aims to support parties in negotiating affordable rental agreements and tries to promote best practice amongst landlords and tenants.

The Code applies to all commercial leases held by businesses which have been seriously negatively impacted by the Covid-19 crisis. 

It is important to note that a tenant’s legal obligation to pay rent and comply with tenant covenants in the lease remain, unless an agreement is reached with the landlord. If a tenant can pay their rent in full, it is clear that they should continue to do so.

However, where a tenant is unable make full payments of rent, the Code provides some guidance of how a landlord and tenant should approach this situation.

The Code encourages collaboration between the landlord and the tenant, recognising that it is in both their interests for the tenant’s business to continue trading from the property during a recovery period.

A tenant who cannot afford to pay their rent is encouraged to approach their landlord to seek a temporary agreement/concession to assist them whilst they transition through a recovery period. The Code recognises that the relationship between each landlord and tenant is different, but states that each party should act in good faith, reasonably and flexibly. This can include a tenant being transparent about why they need a concession, including providing financial information where necessary, and a landlord ensuring they clearly explain the reasons for any refusal.

Possible arrangements suggested by the Code include:

1. A rent-free period for a set period of time;
2. A reduced rent for a set period of time;
3. A deferral of the whole or part of the rent for a set number of rent payment periods;
4. All or part of the rent to be paid as a proportion of the turnover of the site, incorporating any period during which the site was closed;
5. Landlords drawing from rent deposits on the understanding that they do not need to be topped up by the tenant until it is realistic and reasonable to do so;
6. Landlord’s waiving contractual default interest on unpaid rents; and/or
7. Rents being paid in arrears rather than in advance to make payment plans more affordable.

The Code also considers service charge and suggests that, where there is a known net reduction in overall service charge due to the lack of use of a property, this reduction should be passed on to the tenant as soon as possible in order to assist with cash flow.

It is clear that the government are encouraging cooperation and collaboration between landlords and tenants in order to help as many businesses as possible survive the impacts of the Covid-19 crisis and to ensure properties remain occupied.