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.