The Lifeline Project was a well-regarded charity. Failure to carry out the targets within the contracts led the charity into insolvency and resulted in a personal, 7-year disqualification order.
Special rules for beneficiaries
Special rules apply regarding beneficiaries where:
- The deceased leaves an interest in a property as a specific gift to an individual/s; or
- Where the Personal Representatives (PRs) transfer an interest in a property in satisfaction of a pecuniary gift, e.g. a legacy of £50,000, or an interest in residue; or
- Under the law in another country, the deceased’s property interest passes automatically to the beneficiary as an heir to the estate.
In such a case, if a beneficiary with an above interest sells their only home and buys a replacement that purchase may be subject to the higher rate SDLT. What is crucial is analysing whether a beneficiary had an interest in the estate’s property in the three years or more before their own chargeable transaction.
So if a beneficiary, e.g. specific beneficiary (where an interest in a house is left directly to them) or residuary beneficiary inherited an interest in a property within the THREE YEARS before a purchase of a major interest of their own, the interest in that inherited property can be ignored in calculating if they meet the higher-rate SDLT conditions in certain circumstances.
These circumstances are that the beneficiary became a joint owner of the interest by inheritance AND his and his spouse’s/civil partner’s share is no more than 50% of the whole interest in that property.
For example, a father dies and leaves the house half to his son and half to his daughter. Providing the house remains unsold and the residue was ascertained within three years then no higher SDLT would be due if the daughter sells her main residence and buys a replacement main residence in this period. She owns ‘only’ 50% and inherited it within three years of her purchase.
However, if the inherited interest is more than 50% or was inherited more than three years before the chargeable transaction, then it will count as an interest in another dwelling, and so the higher-rate SDLT will be due on the beneficiary’s own purchase.
Taking the same example as above, the son and daughter inherit their father’s house equally but they decide to retain it as an investment and residue was ascertained more than three years ago and then the daughter or son sell their main property and buy a replacement one, then there will be the higher-rate SDLT on the purchase of their own house.
To a casual observer, it might look like HMRC are discouraging people from retaining inherited property as an investment.
The three-year period
In terms of when the three years starts, what is important is the date that the individual becomes entitled to the interest. An interest in an administered estate is not a major interest in land, and so usually the date the individual acquired the interest is the date the interest is transferred to them. Having said this, the date will also be when the residue of an estate has been ascertained, and the PRs hold the residue of the estate for the beneficiaries absolutely. In jurisdictions where property devolves directly on heirs, the date of inheritance will be the date of death.
Sale of the estate’s property
Once the estate receives sale proceeds, (if the PRs decide to sell the property) then the property interest ceases. So there would not be any higher rate SDLT if PRs/beneficiaries have sale proceeds in their hands instead of the actual property/interest in a property, i.e. the property is sold, before their own purchase.
If the beneficiaries sell the inherited property within three years of their own purchase, they can reclaim the higher rate SDLT already paid.
Executors and beneficiaries alike need to be aware of this potential issue.
For more information about the issues raised in this briefing, please contact us today.
On 23 July, trainees from Anthony Collins Solicitors will host an ‘experience day’, which will involve various activities and presentations, with lawyers and non-lawyers from across the firm.
The Office of the Immigration Services Commissioner (OISC) has launched a new scheme specifically for charities and not-for-profit organisations who want to advise EU citizens on UK settlement.
In the second part of our series on contract management pitfalls, we look at the risks and opportunities presented by payment mechanisms in construction contracts.
Under most construction contracts, the contractor takes on the ground conditions risk. However, a recent case has demonstrated that the risk can fall on the employer.
The UK Government has been consulting on how it should promote social value in its procurements. Here is our response that we submitted to the consultation...
The Tenant Fees Act 2019 came into force on 1 June 2019.
A recent case in the Court of Appeal will no doubt bring a sigh of relief for employers, but a corresponding sigh of disappointment may be uttered for equality and gender balance in the workplace.
This briefing assists response to the consultation paper by outlining the consultation questions, providing some background information and prompting some thoughts and potential answers.
A report published on 29 May by the Institute for Fiscal Studies (IFS) has found that since 2009-10, local government spending on services has fallen on average by 21% in real terms.
To receive invitations to our events, as well as information and articles on legal issues and sector developments that are of interest to you, please sign up to Newsroom.