I am dealing with an estate where the residue is left to their unmarried partner, resulting in a charge to IHT. The surviving partner is considering a Deed of Variation to include a gift of a 15% share in the deceased’s residence to their adult children which would enable them to claim the RNRB, followed by NRBDT and then balance of residue to surviving partner.
Both children are hoping to purchase their own properties within a year and they are concerned they will lose first time buyer’s relief and their help to buy ISA.
If the Deed of Variation includes a specific gift of a share in the property, does anyone know at which point they would be considered to have inherited an interest for SDLT purposes? i.e. as of the date of the variation, date of death, or only when the property is transferred to them?
Drafting the Deed as a gift of share in residue might give them more time if purchase can take place before the estate finalised, but I’m concerned this could result in them receiving more/less than £175,000 interest in property once residue is ascertained.
I would say when the property has been assented to the beneficiaries, they then acquire the property for SDLT purposes. Before that period the beneficiaries only have a ‘chose in action’ and therefore not a ‘major interest in a dwelling house’.
That said, if there are unnecessary delays in assenting the property, or in this case, the gift under the Deed of Variation is a specific gift, then HMRC may argue the residue has been ‘ascertained’ at an earlier stage, before the assent takes place. See CG30700. This could mean the beneficiaries have acquired the property for SDLT purposes before the assent, (although I don’t believe HMRC would argue the residue has been ascertained within 1/2 years of death).
• where the estate is unadministered - "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. Consequently, it considers that the date that an individual acquires an interest in any land that comprises part of the estate is 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.
where an interest under a will has been assented - "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 16(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 16(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.
If you determine that the 3% SDLT surcharge applies to the purchase, in light of the assumptions, a reclaim may be possibly broadly where a previous main residence is sold within 3 years of the effective date of the purchase.
With regard to Andrew’s post, I believe the ‘3 year inherited rule’ does not apply to FTBR, but applies where the transaction is subject to the 3% SDLT surcharge.