Fw: First Time buyer relief

Taking it a stage further, would a beneficiary who is appointed a revocable life interest in a trust which owns a residential property, lose the possibility of claiming the relief, bearing in mind the width of
the definition of “acquisition” in s43(2) Finance Act 2003?

Simon Northcott

My understanding of the FTBR is as follows:

First time buyer relief will not apply if, inter alia, either Sch 6ZA para 1(4) or 1(7) is breached.

Sch 6ZA para 1(4): first time buyer
Sch.6ZA para 1(4) requires the purchaser to be a first time buyer who is defined in para 6(1)(a) as someone who “has not previously been a purchaser…. of a major interest…”.

There is no requirement that the purchaser possesses the earlier major interest at the time of purchase of the second property.

In determining whether an individual has been a previous purchaser of a major interest a beneficiary who possesses a life interest or a reversionary interest is treated as having acquired an equitable interest in the trust property. However, a discretionary beneficiary would not posses an equitable interest in the trust property.

Hence the purchase of a second property by someone who, currently holds, or previously held, a life or reversionary interest in trust property will not qualify as a first time buyer.

Whether the life interest is revocable or not would not seem to alter the above.

Sch 6ZA para 1(7): higher rate transaction:
Sch 6ZA para 1(7) provides that first time buyer relief cannot be claimed if the transaction is a higher rate transaction under Sch 4ZA para 1. A higher rate transaction is one where, inter alia, on the effective date (ie completion) of the new purchase the purchaser also possesses a “major interest” in another dwelling [Sch 4ZA para 4(a)].

A major interest is defined in FA 2003 s.117 but modified slightly by Sch 4ZA para 2(4) (with respect to leases of 7 years or less).

Where a beneficiary under a settlement is entitled to occupy a trust property for life (or be entitled to any income earned from it) the beneficiary for higher rate purposes is treated as holding the interest in the dwelling [Sch 4ZA para 11(3)]. In such a case the purchase of a second property by the beneficiary will qualify as a higher rate transaction thus denying first time buyer relief.

A similar result occurs where the beneficiary holds a reversionary interest ie a denial of first time buyer relief on a purchase.

However, a purchase by a discretionary beneficiary (who does not posses an equitable interest in the trust property) would not be a higher rate transaction and on this basis first time buyer relief is not denied.

Where at the time of completion on a property purchase by a beneficiary that beneficiary’s equitable interest in a trust property no longer exists (eg the life interest has been revoked) then that purchase would not on this basis constitute a higher rate transaction; however, the purchase would still fall foul of Sch 4ZA para 1(4) above.

Malcolm Finney