Am I a first-time buyer or not?

ajm410

Hi all,

Could anyone please help me understand whether I am classed as a first-time buyer or not? I'm in the process of buying a flat, and while my mortgage broker suggested I wouldn't be initially, I've called HMRC today who've suggested that may not, in fact, be the case.

In December 2015, my late mother passed away and I was named as the executor of her estate. I acquired a grant of probate to manage and sell her estate and distribute the monies to the trustees, which included myself and my sister. Earlier this year, I sold her primary residence as part of the estate (the seller on the contract was "MY NAME as Executor for the late MY MOTHER'S NAME"), and split the proceeds between the two of us.

At no point, however, was the property/mortgage transferred into my name, nor did I ever reside in it.

Bearing the above into consideration, would I be considered a first-time buyer for the purposes of paying stamp duty land tax?



Many thanks in advance!!

kingstreet

Yes.

You have never 'acquired' a property.

teddysmum

kingstreet wrote: »

Yes.

You have never 'acquired' a property.

I'd say they have acquired (given been custody of) the house to sell on behalf of the estate, but they are a first time buyer, as they have not bought (owned) a home before.

G_M

You'd need to read the HMRC manuals in detail, but my guess is you're a FTB for SDLT purposes.

You have never purchased or owned a property.

Start with this (I can't be bothered to read the whole lot!):

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual

Rich2808

This is a rather grey area i.e. if you inherited a property (or a share of one) anywhere in the world but have never 'purchased' a property are you eligible for the FTB stamp duty relief or not? The published regulations refer to purchasing or acquiring an interest in a dwelling in the UK (excluding Scotland) - does this include inheriting a property which was sold (and you got the proceeds from) but never lived in? The FTB eligibility wording while refering to purchasing if the property is in England, Wales and NI but acquiring an interest in for a property in Scotland and elsewhere - does acquiring an interest include an inheritance?

The help to buy isa eligibility by contrast defines an eligible FTB as someone who has never held an interest in a residential dwelling which would exclude those who inherited all or a share of a residential property in the past but have never physically purchased or acquired one? Same applies to the lifetime isa re the early withdrawal before age 60.

Could you therefore be eligible for the FTB stamp duty relief but not for the help to buy isa (or lifetime isa re the early withdrawal benefits for FTBs) bonus if you have inherited a property but never purchased (or acquired) one? Does any one know?


Help to buy isa eligibility
https://www.helptobuy.gov.uk/documents/2015/12/eligibility-of-ftbs.pdf

Budget FTB relief guidance
https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/661612/8274_Relief_for_first_time_buyers.pdf


(1) In this Schedule “first-time buyer” means an individual who—
(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,
(b) has not previously acquired an equivalent interest in a
dwelling situated in a country or territory outside England,
Wales and Northern Ireland,
(c) has not previously been, or been one of the persons who was,
“the person” for the purposes of section 71A or 73 in a case
where the main subject-matter of the first transaction within
the meaning of the section concerned was a major interest in
a dwelling, and
(d) would not have been such a person for those purposes in
such a case if the provisions mentioned in paragraph (c) had
been in force, and had had effect in the country or territory
concerned at all material times (subject, where required, to
appropriate modifications).
(2) For the purposes of sub-paragraph (1)(b) and (d), ignore a lease
which has less than 21 years to run at the beginning of the day after
the date on which it is acquired.

bowlhead99

Today's link is

https://goo.gl/3R4u1m
[Edit - direct link to govuk site written out in full was not working as MSE truncated it when it wrapped over one line's length]


Per page 7 definition of a first time buyer you must not have previously acquired a major interest in a dwelling or an equivalent interest in land situated anywhere in the world. Couple of key points:

1) That *includes* previous acquisitions by inheritance or gift.

2) Relief is not denied by virtue of a previous acquisition as a trustee... *unless* the purchaser was also a beneficiary of the trust.

If we examine OP's situation within the basic rules:

Assets in a death estate are basically treated by HMRC like an interest in possession trust. If the assets produce an income (eg rent), the trustee might for day to day practical purposes have to pay income tax to HMRC before the assets are sold but then the individual legatees get assigned the income when the estate is finalised and pay their own tax on it at their own rates taking into account what already got paid on their behalf during the administration. Likewise if the property is not sold for some time and goes up in value before it's sold, that gain belongs to the eventual beneficiary who has to square up for any tax not already paid on his behalf by the trustee / executor.

So, what has happened here:

OP acquired as 'trustee', an interest in a property. Acquiring something by gift or inheritance (point 1 above) is still acquiring it. But, while handling the paperwork at that point, it was not "his" to keep for himself at that point, he was holding it for the beneficiary. Per point 2 above, relief isn't denied if you're only holding as trustee and you're not also the beneficiary.

Obviously if you *are* also the beneficiary and they let you get away with saying it was only legally yours as trustee and the underlying beneficiary interest wasn't important, that would be a huge loophole. People would just go round acquiring things with themselves as both trustee and beneficiary and claim they were entitled to first time buyer status which would be a farce.

So in OPs case was he also a beneficial owner of that piece of residential property he acquired as trustee/executor? Or was his interest *purely* as trustee and not a beneficiary / legatee of the residential property assets in the estate?

We should be able to determine that by looking at how the estate was distributed - 'follow the cash'. OP said he sold the property and split the proceeds between him and sister who were the beneficiaries. The reason he split the cash that way is for one of two reasons. Either:

A) he is a major beneficiary of the property specifically, or the residue of the estate generally (which includes property proceeds). In which case, he is the beneficiary of the house generally and if it takes a while to be sold he may have been able to walk off with more than probate value, keeping the extra - and it's just like he and his sister own the house while the executor is simply selling it for him for administrative convenience. In such a case, the property is basically his.

the property is not his as beneficiary at all, he just has a fixed amount of cash bequeathed to him in the will, which could be settled in full out of another part of the estate without using any property proceeds whatsoever, and it is just sheer coincidence that shortly after the time the property sale went through, he still happened to be owed that money for his inheritance so paid it over to himself there and then even though the fixed entitlement was technically the proceeds of some other assets or cash.

I would suggest that OP's scenario is more likely to be 'A'. He had a right to a substantial share of the house or the proceeds from it. So even though he was administering it in the capacity of a trustee for some beneficiary, be can't say "well relief shouldn't be denied to me, I only acquired it as trustee..." Because actually he acquired it as trustee, but also beneficially for *himself*. (And for his sister).

If that is the case, I would infer it's not appropriate to try to claim "first time buyers relief". Let's be more specific and say "first time acquirers/ beneficial owners" relief which is what it is. The type of person the government is trying to help via a leg up to the property ladder is not a person who has inherited a house but then cashed it in rather than keeping it on, and is now taking the opportunity to get back into the market.

They are trying to help people who are literally only now getting a beneficial interest in a property for the first time ever.

The above is not to be construed as professional tax advice but makes sense to me, given the scenario and the HMRC rules which are a lot more detailed than the snappy soundbite "first time buyer". I don't think you can claim the SDLT saving of up to £5k on a £300k property, if your facts are how I assumed them.

You don't have to decide if you meet some layman's definition of a first time buyer. You have to decide if you meet the govt's strictly defined terms and if you think you can, you will need to get a solicitor who reads them the same way as you so you can have their help defending your claim should HMRC choose to dig into your case after you build your plans around not paying the tax.

Rich2808

bowlhead99 wrote: »

Today's link is

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/661728/8274_guidance_note_SDLT_relief_for_first_time_buyers.pdf


Per page 7 definition of a first time buyer you must not have previously acquired a major interest in a dwelling or an equivalent interest in land situated anywhere in the world. Couple of key points:

1) That *includes* previous acquisitions by inheritance or gift.

2) Relief is not denied by virtue of a previous acquisition as a trustee... *unless* the purchaser was also a beneficiary of the trust.

If we examine OP's situation within the basic rules:

Assets in a death estate are basically treated like an interest in possession trust. If the assets produce an income (eg rent), the trustee might for day to day practical purposes have to pay income tax to HMRC before the assets are sold but then the individual legatees get assigned the income when the estate is finalised and pay their own tax on it at their own rates taking into account what already got paid on their behalf during the administration. Likewise if the property is not sold for some time and goes up in value before it's sold, that gain belongs to the eventual beneficiary who has to square up for any tax not already paid on his behalf by the trustee / executor.

So, what has happened here:

OP acquired as 'trustee', an interest in a property. Acquiring something by gift or inheritance (point 1 above) is still acquiring it. But, while handling the paperwork at that point, it was not "his" to keep for himself at that point, he was holding it for the beneficiary. Per point 2 above, relief isn't denied if you're only holding as trustee and you're not also the beneficiary.

Obviously if you *are* also the beneficiary and they let you get away with saying it was only legally yours as trustee and the underlying beneficiary interest wasn't important, that would be a huge loophole. People would just go round acquiring things with themselves as both trustee and beneficiary and claim they were entitled to first time buyer status which would be a farce.

So in OPs case was he also a beneficial owner of that piece of residential property he acquired as trustee/executor? Or was his interest *purely* as trustee and not a beneficiary / legatee of the assets in the estate.

We should be able to determine that by looking at how the estate was distributed - 'follow the cash'. OP said he sold the property and split the proceeds between him and sister who were the beneficiaries. The reason he split the cash that way is for one of two reasons. Either:

A) he is a major beneficiary of the property specifically, or the residue of the estate generally (which includes property proceeds). In which case, he is the beneficiary of the house generally and if it takes a while to be sold he may have been able to walk off with more than probate value, keeping the extra - and it's just like he and his sister own the house while the executor is simply selling it for him for administrative convenience. In such a case, the property is basically his.

the property is not his as beneficiary at all, he just has a fixed amount of cash bequeathed to him in the will, which could be settled in full out of another part of the estate without using any property proceeds whatsoever, and it is just sheer coincidence that shortly after the time the property sale went through, he still happened to be owed that money for his inheritance so paid it over to himself there and then even though the fixed entitlement was technically the proceeds of some other assets or cash.

I would suggest that OP's scenario is more likely to be 'A'. He had a right to a substantial share of the house or the proceeds from it. So even though he was administering it in the capacity of a trustee for some beneficiary, be can't say "well relief shouldn't be denied to me, I only acquired it as trustee..." Because actually he acquired it as trustee, but also beneficially for *himself*. (And for his sister).

If that is the case, I would infer it's not appropriate to try to claim "first time buyers relief". Let's be more specific and say "first time acquirers/ beneficial owners" relief which is what it is. The type of person the government is trying to help via a leg up to the property ladder is not a person who has inherited a house but then cashed it in rather than keeping it on, and is now taking the opportunity to get back into the market.

They are trying to help people who are literally only now getting a beneficial interest in a property for the first time ever.

The above is not to be construed as professional tax advice but makes sense to me, given the scenario and the HMRC rules which are a lot more detailed than the snappy soundbite "first time buyer". I don't think you can claim if your facts are how I assumed them.

You don't have to decide if you meet some laymen's definition of a first time buyer. You have to decide if you meet the govt's strictly defined terms and if you think you can, you will need to get a solicitor who reads them the same way as you so you can have their help defending your claim should HMRC choose to dig into your case after you build your plans around not paying the tax.

Thanks - the correct link to the guidance is here

https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers-guidance-note

The actual statutory regulations for approval by parliament are on a different page -
and they refer to have 'purchased' a property before.

https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers

Hence my confusion!

“First-time buyer”
6 (1) In this Schedule “first-time buyer” means an individual who—
(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,

Perhaps they should call it a relief for first time owners - not first time buyers!

Because you can own a property via an inheritance but have never bought/purchased one!

Also what is the reference date for inheriting a property e.g. is it the date probate comes through or when your name is added
to the deeds with the Land registry or equivalent or when you get the proceeds of the sale from the executor.

I have just inherited 50% of a property in Ireland - but probate won't come through for some time -
so am I still a first time buyer if I buy a property in England now and do I qualify for the FTB relief (and when do I cease being one?!).

I will never live in the property I part inherited - the executor/solicitor will just sell it and pay me the proceeds so I will never
appear on any deeds or land registry records in the Irish republic.

Stockyscot

Hi, If I have a bought a property in the past (4yrs ago, been renting since) but now wish to start a joint mortgage application with my Fianc! who has never owned a house or mortgage are we considered first time buyers? Would we need to pay stamp duty? Thanks

Rich2808

Stockyscot wrote: »

Hi, If I have a bought a property in the past (4yrs ago, been renting since) but now wish to start a joint mortgage application with my Fianc! who has never owned a house or mortgage are we considered first time buyers? Would we need to pay stamp duty? Thanks

If she bought it solely in her name she could get the stamp duty relief - as she is an FTB. If you bought
the property jointly you/she would not get the relief as you are not an FTB.

'Page 5 of the guidance
The third condition: The purchaser or purchasers are first time buyers intending to
occupy the dwelling as a main residence
Only purchasers who are individuals are entitled to claim relief. If there is a purchaser who
is a company then no relief is available.
All the purchasers must be first time buyers. See Chapter 3 for the meaning of first time
buyer. If there are any purchasers who are not first time buyers then no relief is available.'

She would be eligible, however, for the help to buy isa bonus as a first time buyer (or could use the lifetime isa incentive)
if you bought jointly but not the first time buyer stamp duty relief
if you bought jointly.

This will cause a bit of confusion - when is an FTB not an FTB (i.e. if they are buying with someone else who isnt)?!!

https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers-guidance-note

bowlhead99

Rich2808 wrote: »

Thanks - the correct link to the guidance is here

https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers-guidance-note

The actual statutory regulations for approval by parliament are on a different page -
and they refer to have 'purchased' a property before.

https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers

Hence my confusion!

Wow, I don't blame you!

The pdf detailed guidance note published today is the one I built my comments on. The direct link to pdf got truncated by mse's URL handler so I have added a short link instead - but is the same one from your guidance note landing page link.

In the guidance they specifically refer to not having (alone or with others) previously acquired a major interest... And clarified that acquired can mean by gift.

And in the draft statute with explanatory text, as you say - they mean (a) not previously been a purchaser in a land transaction, (b) not previously acquired an equivalent interest in a dwelling situated in a country outside England, Wales, NI.

If we were to read the legal document and apply the guidance notes on top, two sources together - we might conclude:

1) If you *purchase* a property in England Wales NI you are definitely not entitled to relief ;

- that's per the draft law change
Then

2) If you *acquire* (and acquire can include gift, inheritance, but not just purely being trustee without also being beneficiary) an interest outside England Wales NI, you are also not entitled, to catch all the people who might have already bought or been given foreign property, have a family home abroad or in Scotland where SDLT rules are different.

- that's per the draft law change with the overlaid guidance about what we mean by acquire in this context.

Meaning, if OPs mother's estate was in England Wales NI, he only needs to follow (1), because (2) doesn't come into it because the property he would be talking about was not outside those three home countries so we don't even start to look at what "acquire" means.



Perhaps.

bowlhead99

Rich2808 wrote: »

She would be eligible, however, for the help to buy isa bonus as a first time buyer (or could use the lifetime isa incentive)
if you bought jointly but not the first time buyer stamp duty relief if you bought jointly.

This will cause a bit of confusion - when is an FTB not an FTB (i.e. if they are buying with someone else who isnt)?!!

https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers-guidance-note

This is basically the government saying, we are not going to give you a free ride on a property transaction stamp duty where one of the buyers of that property isn't buying for the first time. We don't care in what proportions you are buying it, as that's going to be WAY too complicated to work out what proportion of stamp duty we can discount, especially when people can have really complex deeds of trust when co-buying and having deposits and mortgage payments in variable proportions etc. We are just going to say that the transaction doesn't qualify because one of the buyers had had property before.

But if you as an *individual* have never owned property before, then you as an individual can get a bonus on your personal savings which you're putting into the property to help you buy a place - either using HTB ISA or L ISA (ISA being Individual Savings Account). But an individual who *has* been a property owner can't get a bonus boost on his Individual Savings Account because he is not the sort of person we think needs one.

I don't think that's too complex for most people to follow, to be honest.