Can the forum advise if first time buyers relief is lost if the buyers are named as remaindermen in a life interest trust? Life interest trust set up within a will giving Life Tenant right of income only and occupation for life. On his death A & B will inherit. I’m led to believe as remainder men have an interest in the property, they cannot be perceived to be first time buyers even if they haven’t ‘purchased’ a property.
I don’t believe it is lost. The test is whether they are a “first-time buyer” within Sch 6ZA of FA 2003. I don’t believe a remainderman would fail to meet any of the conditions in para 6 (defining the term) because they have not previously been a purchaser in the SDLT sense. The default position is Sch 16 para 4, that the trustees are the purchasers of the entire property, including the beneficial interest.
They can also lose the relief if the transaction is a higher-rate transaction within Sch 4ZA but, again, I don’t believe the remainderman would be considered to have an interest in the property. Para 11 provides that a beneficiary with an IIP would be treated as being the purchaser, expressly overrides Sch 16 para 4 for the purposes of Sch 4ZA.
Simple really…
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I looked at this last year and came to the conclusion that it depended on whether the LI still existed when the remainderman purchased. If it was then there was no previous acquisition but if the LI had come to an end so the property had passed to the remaindermen FTB would not be due as they had acquired the property SDLTM29845
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Might be a useful perspective and analysis for civil law nus-propriétaires taking under under a foreign gift…
Matthew - the key test for English property is not whether they have had an interest in land but whether they have been a purchaser:
“(6)(1)(a) has not previously been a purchaser in relation to a land transaction the main subject-matter of which was a major interest in a dwelling,…”
I don’t believe a remainderman of an IIP trust could be a purchaser until the interest falls into possession.
I understand the incipient thought process that it might depend on the timing. A remainder to a life interest is vested in interest in not in possession. It would be absurd (so therefore not impossible!) for legislation to prescribe that the remainderman already owns a property, if the trust fund comprises a residence occupied by the life tenant. So unsurprisingly it doesn’t.
And the slam dunk coup de grace is that a remainderman is NEVER a “purchaser” at all of the trust property for s43(4) FA2003 if he has never provided consideration. Trustees likewise are only purchasers within para 4 Sch 16 if they have parted with your actual Wonga. If they have not and so are not purchasers of a chargeable interest how on earth can a beneficiary be? No wonder the Parliamentary drafter did not create a nonsense on stilts, though not entirely immune therefrom.
There is really no substitute for reading the legislation.
Jack Harper
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As a follow on, what is the position of Trustees re: Stamp Duty?
Situation:
Lifetime Settlement by H&W. Appointed S and DiL as Trustees. DiL now retired following divorce, with settlors Grandson appointed.
Trust creates Life Interest for Settlors, with son as remaindermen. Son currently doesn’t own a property, neither does the Grandson. Does their position as Trustees create any problems for them re: additional Stamp Duty on a future purchase?
On reading this thread, it seems not to me.
In my view para 4 Sch 16, deeming the trustees of a trust which is not a bare trust to be the purchaser, is negated by s43(5). So it is only operative where they acquire a chargeable interest for consideration.
Furthermore Sch 6ZA only applies to an individual. I would expect an express extension to trustees here to rope in trustees, even if all were individuals. The term is not defined and not even Sch 16 bothers to deem them as elsewhere to be a single continuing body but plainly ordains distinctive treatment for persons whom a judge would understand to be “trustees”. Whether a person is or is not a trustee is a status which the general law is entirely equipped to determine.
Jack Harper
Hi Jack
Can you elaborate a little on your first para.? s.43(5) says “A person is not treated as a purchaser unless he has given consideration for, or is a party to, the transaction”
I agree this clarifies the position for the remainderman (if they have not been party to a transaction, they cannot have been purchasers, therefore are not prevented from being first-time buyers).
However surely the trustees could still be purchasers because they were party to a transaction (namely the assent/transfer of the property from the executors to them), irrespective of consideration. Admittedly it gets vague if the trustees are also the executors and there was no formal assent.
As a general rule s43(4) makes a person who has acquired the subject-matter of a land transaction a “purchaser” even if he does not give “consideration”. But s43(5) must be a derogation from or at least a qualification of that or it makes no sense at all. So a purchaser under subsection (4) is not to be treated as such unless he has given consideration or is a party to the transaction but without giving it.
SDLTM07100 and 07200 are confusing.
“The definition of purchaser is limited to a person who is either a party to the transaction or has provided consideration for that transaction.” Surely “or” should be “and”? If a disjunctive reading is what is meant it targets, so to exclude, a non-party who has not given consideration but has acquired a chargeable interest within s43(1)-(3). A Unicorn.
Another twist is that the reference is to consideration not “chargeable consideration”. So can a person give consideration for subsection (5) or be regarded as not doing so for subsection (4) even if it is not chargeable consideration within s50 and Sch 4?
I could understand a non-party who has given consideration being treated as a purchaser if only for the avoidance of doubt, but that is not what s43(5) says. It is not clarified by para 14 Sch 16, which on reflection I find of no assistance in resolving who is a purchaser.
One could read s43(5) as designed to include a non-party who has given consideration but under s43(4) he still must acquire the subject-matter of the transaction.
Christopher Cox (a former colleague) and Richard Woolich in their book make a valiant attempt to conjure up a relevant situation. A head lessee pays an unsatisfactory sub-tenant to surrender his sub-lease to the head lessee. The latter is a purchaser but the authors consider that the head landlord might be also, as his interest has been benefitted per s43 (3)(b)(i): but he is not a purchaser because of s43(5).
I admire the authors’ ingenuity but I feel this is not only a recondite argument but is clutching at straws. I note that SDLTM offers no example or interpretation of such an acquisition by benefit. I think the provision is more easily explained: arguably the person taking a surrender in ordinary language acquires nothing which prima facie takes the whole transaction out of s43(1) and (2). We are familiar with the CGT legislation needing to deal with an occasion of a disposal without a corresponding acquisition or vice versa : ss.17(2) and 22 TCGA.
The normal statutory approach is sadly but precisely not to cater for any but the most obvious targets, leaving the judges to sort out anything else at taxpayers’ expense. I find it odd that special provision should be made for a possible situation that the learned authors were pushed hard to imagine, on which HMRC have no guidance to offer, and is thus close to being redundant nonsense as a by-product of official rampant paranoia. A concern to avoid an unintended consequence by excluding from being a purchaser a non-party who has not provided consideration. Really?
But as for Sch 6ZA no species of “purchaser”, not even an exotic rara avis within s43(3((b)(i), can turn a trustee into an individual. Though a CGT kind of definition might have been helpful.
Jack Harper