Read the original guidance here:
HMRC SDLT: SDLTM29855 – Definition of a first-time buyer – Previous acquisition by a Bare Trust

Understanding First-Time Buyer Relief in Relation to Bare Trusts

The concept of first-time buyer relief is an important aspect of stamp duty land tax (SDLT) in the UK. This relief allows eligible individuals to benefit from reduced rates or exemptions when purchasing their first home. When it comes to bare trusts, the rules surrounding this relief can seem complex. This article aims to clarify how previous acquisitions by a bare trust impact eligibility for first-time buyer relief.

Key Definitions

• First-Time Buyer: A person who has never owned a residential property in the UK, either solely or jointly.
• Bare Trust: A type of trust where the trustee holds assets on behalf of a specifically named beneficiary. The beneficiary has the right to demand the assets at any time.
• Major Interest: This term generally refers to ownership of leases for longer than seven years or freehold ownership.

Eligibility for First-Time Buyer Relief

Relief is not automatically denied if a person has previously acquired a property as a bare trustee. However, there are conditions:

• If the purchaser was also a beneficiary of the bare trust and that trust acquired a major interest, then relief will not be available.

Impact of Previous Acquisition by a Bare Trust

It’s important to understand how the status of being a bare trustee interacts with a person’s eligibility for first-time buyer relief:

• If a person acted as a bare trustee but was not a beneficiary, they are still considered a first-time buyer.
• If a person was a beneficiary of a bare trust that acquired a major interest, they are disqualified from claiming first-time buyer relief.

Special Rules Before 6 March 2024

Prior to 6 March 2024, specific rules applied to situations where a bare trust acquired a new lease. Under these rules:

• A person who had been a beneficiary of a bare trust that acquired a new lease was still considered a ‘first-time buyer’ when making future purchases of a dwelling.
• This was because the regulations stated that the beneficiary was not viewed as having made the purchase; instead, the trustees were regarded as the purchasers.

Changes Effective from 6 March 2024

Starting from 6 March 2024, the special rules previously mentioned will no longer apply. The rules for determining entitlement to first-time buyer relief will change in the following way:

• Eligibility will now depend on whether the beneficiary of the bare trust has previously acquired a major interest.
• If there are multiple beneficiaries, each must satisfy the conditions to qualify for the relief.

Example Situation

To illustrate how the rules apply in practice, consider the following example:

A is a bare trustee for B and has acquired a major interest in a dwelling for B’s benefit. Both A and B later decide to purchase homes in their own names for their own use.

• A qualifies for first-time buyer relief because A’s previous acquisition as a bare trustee is disregarded.
• B does not qualify for the relief because they are considered to have already acquired a dwelling for SDLT purposes.

Further Information on Bare Trusts

For a more detailed understanding of the concept of a bare trust and its implications under the SDLT framework, refer to SDLTM31710, which provides comprehensive information on this topic.

Conclusion

Understanding the implications of being a beneficiary or trustee in a bare trust is essential when considering eligibility for first-time buyer relief. This clarity is vital for both the trustees and beneficiaries involved in property transactions.