UK government SDLT draft legislation needs further clarification, says STEP
STEP has particularly focused on the impact of the proposed test of residence to be used for individuals, participators in UK close companies and trustees.
The draft legislation sets out the definition of non-residency in relation to a chargeable transaction. An individual is defined as UK-resident in relation to a chargeable transaction ‘if the individual is present in the United Kingdom on at least 183 days during any continuous period of 365 days that falls within the relevant period,’ the legislation says. The ‘relevant period’ begins on the day 364 days before the effective date of the chargeable transaction, and ends on the day 365 days after the effective date of the chargeable transaction.
STEP’s response to the draft legislation welcomed the government’s explanation that introducing the new test for individual residence would create simplicity, but raised concerns that the draft legislation as it stands may actually create complexity ‘by introducing a further set of complex rules for individuals and their advisers to familiarise themselves with and which, as drafted, could give rise to some anomalous outcomes.’
In particular, the response highlighted the exceptions to the test. The legislation carves out certain circumstances under which the ‘relevant period’ refers only to the 364 days leading up to the relevant transaction, ending on the effective date of the chargeable transaction. STEP has raised concerns about the issues this creates for trusts and married couples or civil partners.
STEP calls for detailed guidance prior to 1 April 2021 to ensure that taxpayers and their advisors can familiarise themselves with the new rules.
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