Assents and SDLT

Trusts Discussion
1

Under the old SDLT regime an assented property was exempt from both the duty and submission of a return. Has the new regime changed this where the beneficiary already owns a property?

Frances White
Number One Legal

2

No, but the inherited property will be taken into account on the purchase of a residence in certain circumstances.

Simon Northcott

3

Simon, thank you for your response, could you point me in the direction of the exceptions please. I have been “off line” for a while and a steer would be much appreciated.
Frances White
Number One Legal

4

What i meant was that the inherited property will be taken into account on the purchase of a residence by the beneficiariy in certain circumstances, as follows:
If an individual inherits a major interest in a dwelling, that individual is not treated as having a major interest in the inherited dwelling in the three-year period beginning with the date of inheritance, provided that the individual’s beneficial share in the interest does not exceed 50% (paragraph 15(1) and (2), Schedule 4ZA, Finance Act 2003). If, at any time in that three-year period, the individual’s beneficial share in the interest exceeds 50%, the individual is treated as having a major interest in the inherited dwelling from that date (paragraph 15(3), Schedule 4ZA, Finance Act 2003).
An individual’s beneficial share in a major interest exceeds 50% if any of the following conditions are met:
The individual is beneficially entitled as a tenant in common or coparcener to more than half the interest.
The individual and the individual’s spouse or civil partner taken together are beneficially entitled as tenants in common or coparceners to more than half the interest.
The individual and the individual’s spouse or civil partner are beneficially entitled as joint tenants to the interest and there is no more than one other joint tenant who is so entitled.
(Paragraph 15(4), Schedule 4ZA, Finance Act 2003.)
Consequently, if an individual does not dispose of their interest in an inherited property within three years of inheritance the higher rates will apply on that individual’s purchase of another dwelling, unless that purchase is to replace an existing only or main residence. This provision was added following consultation to given beneficiaries of estates a breathing space in which to sell inherited property.
For these purposes, “inheritance” is defined as the acquisition of an interest in or towards satisfaction of an entitlement under or in relation to the will of a deceased person, or on intestacy (paragraph 15(5), Schedule 4ZA, Finance Act 2003). HMRC accepts that an interest in an unadministered estate (which is generally considered to be a chose in action is not a major interest in land. Therefore, it appears that the date that an individual acquires an interest in any land that comprises part of the estate will be the date on which that interest is transferred or appropriated to the individual or (if earlier) when the administration of the estate is completed (on the residue being ascertained) and the personal representatives hold the assets on bare trust for those entitled to them. (HMRC’s guidance: paragraph 3.58.)
The definition of “inheritance” uses the same wording as the exemption from SDLT for assents and appropriations by personal representatives where there is no consideration other than the assumption of a secured debt (paragraph 3A, Schedule 3, Finance Act 2003). We do not think that this wording is intended to cover acquisitions of property by virtue of a deed of variation because there is a separate exemption from SDLT where there is a variation for consideration in the form of a reciprocal variation within two years of death (paragraph 4, Schedule 3, Finance Act 2003). Therefore, we do not think that the three-year concessionary period for the purposes of the 3% charge will apply to beneficiaries who acquire property by virtue of a deed of variation.
However, we think that a beneficiary who acquires property by virtue of a disclaimer should benefit from the concession, as that beneficiary’s entitlement will arise under the will or the intestacy rules and so fall within the exemption for assents and appropriations (provided that there is no consideration other than the assumption of secured debt). This is consistent with the fact that there is no separate exemption for disclaimers.

Simon Northcott

1 Like
5

Will someone clarify a point for me regarding the definition of ‘acquires’ for the higher rate SDLT please. A & B inherit a property under a will and a Deed of Variation is made so that B’s share passes to C. Say date of death is 1 Jan 2014, probate is obtained 1 March 2014 and Deed of Variation is signed 5 October 2015. On what date did A acquire his share. Does the 3 year inherited property rule begin on 1 Jan 2014, 1 March 2014 or 5 October 2015?

Joanne Davies
Simpson Wreford & Co

6

The exemption from liability for an assent arises under para 3A, Sch 3 FA 2003.

As a result of the exemption, it comes within s.77A(1) and is carved out of the list of notifiable transactions by means of s.77(1)(a) and the duty to deliver a return by s.76.

They could have made it simpler…

Andrew Goodman
Osborne Clarke LLP

7

My understanding is as stated in Simon Northcott’s post above:

For these purposes, “inheritance” is defined as the acquisition of an interest in or towards satisfaction of an entitlement under or in relation to the will of a deceased person, or on intestacy (paragraph 15(5), Schedule 4ZA, Finance Act 2003). HMRC accepts that an interest in an unadministered estate (which is generally considered to be a chose in action) is not a major interest in land. Therefore, it appears that the date that an individual acquires an interest in any land that comprises part of the estate will be the date on which that interest is transferred or appropriated to the individual or (if earlier) when the administration of the estate is completed (on the residue being ascertained) and the personal representatives hold the assets on bare trust for those entitled to them. (HMRC’s guidance: paragraph 3.58.)

Paragraph 3.58 of HMRC’s guidance says:

The date of the inheritance for these purposes is the date that the individual becomes entitled to the interest. An interest in an unadministered estate is not a major interest in land and so usually the date the individual acquired the interest is the date the interest is transferred to them. Although, see Capital Gains Manual at CG30700 onwards for the situation where the residue of an estate has been ascertained and the personal representative holds the residue of the estate for the beneficiary absolutely.

By way of comparison, paragraph 3.59 says:

In jurisdictions where property devolves directly on heirs, the date of inheritance will be the date of death.

The guidance is at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/509184/GuidanceNote_Final.pdf

Carol Haworth
Thomson Reuters