We are having a “discussion” between the conveyancers and the private client lawyers as to when a property is inherited. If a property is inherited by a non property owner they lose their right to first time buyer status for SDLT purposes. In my view the beneficiary only inherits the property if it is a specific legacy to them. If the property forms part of the residue and is subsequently sold by the executors, then surely no beneficiary (even if there is only one) has “inherited” a property. However, the conveyancers are convinced that a residuary beneficiary of an estate containing a property HAS inherited it. Please can someone point us to the correct authority to clarify this point?
My (probate practitioner) colleague and I are of the opinion that if the property forms part of the residue, the beneficiaries have inherited the proceeds of sale of the property (or a proportion thereof) not the property itself as it has not been transferred into their name. Therefore they should not lose their right to first time buyer status.
Underhill and Hayton has a pretty useful section on this at 1.48, citing Stamp Duties Comr v Livingston  AC 694, Re Hayes’ Will Trusts  1 WLR 758 and Re Leigh’s Will Trusts  Ch 277.
Are the conveyancers worried about it getting caught by Sch. 4ZA p16 Finance Act 2003 and the rules about it being a major interest in land, i.e. more than 50% of the share? My understanding is that HMRC don’t view an interest in an unadministered estate as a major interest in land.
I didn’t find anything about a difference between a specific legacy vs a gift of residue, but it sounds as if the beneficiary only has a chose in action until the estate has been administered. Maybe other members could elaborate?
Could this hinge on the timing of the sale of the property?
The residuary estate is after the payment of all gifts,debts and expenses. If these are paid
before the property is sold, then the property is part of the residuary estate, but if the property is
sold before payment of gifts, etc, then there is only cash in the residuary estate, so perhaps there is no property to inherit.
Can it be argued that title in the property was never passed by the executors to the residuary beneficiary at any time and vested in the executors until the property was sold. The beneficiaries never legally owned the property or were recorded as owners at the Land registry.
Stamp Duty guidance notes are not clear on the issue but have a question:
Q16. Can I claim relief if I have previously bought a dwelling as a trustee?
A16. Yes, provided that you were not also a beneficiary of the trust and you meet the
From the guidance:
In order to count as a first time buyer, a purchaser must not, either alone or with others,
have previously acquired a major interest in a dwelling or an equivalent interest in land
situated anywhere in the world.
This includes previous acquisitions by inheritance or gift, or by a financial institution on
behalf of a person under an alternative finance scheme.
Relief is not denied by virtue of a previous acquisition as a trustee unless the purchaser was also a beneficiary of the trust.
However the ‘when’ of inheritance is not addressed. I cannot see how FTB status would be lost if the property were never owned/transferred to the beneficiaries, only the cash from the sale was transferred.
It may be that a better head than mine has already replied to this while I was composing this.
HMRC may be the best port of call to get clarification.
In the context of the additional 3% SDLT charge, a major interest can be acquired when a property falls into residue and is transferred by the PRs to the beneficiary/ies. It follows that if the property is sold and the proceeds are then distributed that the beneficiary/ies could not have acquired a major interest in a property - it would be bizarre if this were not the case. On that basis, I would expect the same logic to apply to first time buyer status. Hopefully someone else can do better than mere conjecture!