A reader wants to know whether his son will still be able to use his lifetime individual savings account (Lisa) to buy his first home and get stamp duty relief following an inheritance.
The reader asks: "My 22-year old son, who is a full-time student, has a Lisa. But he is about to inherit 8 per cent of his deceased grandfather’s £1.4m house via a bare trust, which was set up purely for the purpose of selling the property. He will be a beneficial owner, but title to the property will not pass to him or the trust. So will he be able to retain his first-time buyer status and stamp duty allowance for when he buys his first property?"
Guy Sterling, personal tax partner at Moore Kingston Smith, says:
A Lisa is a tax-free investment product that benefits from a tax-free bonus if used for a qualifying purpose, including buying a first home. First-time homebuyers can also get relief from stamp duty land tax (SDLT) .
Buying a first home is a qualifying purpose if the property is a “first-time residential purchase”, ie there has been no previous residential property ownership anywhere in the world. The size of the previous ownership interest does not matter.
You are sensible to be concerned about whether your son’s inheritance from his grandfather’s estate could result in him losing first-time buyer status. Guidance from HM Treasury for Isas has confirmed that an individual is still a first-time buyer if a trust was only created to sell a property following a death. Title of the residential property is not transferred to the trust of which your son is an ongoing beneficiary. So as the trust is only to dispose of property held at death, your son’s inheritance will not result in him losing his first-time buyer status for Lisa purposes. But he should get legal advice to confirm that title does not transfer to his name.
There are other Lisa conditions that your son must meet to qualify for the Lisa benefits. These are that the property is located in the UK, costs less than £450,000, is immediately used as a main residence and that the Lisa has been held for at least 12 months.
First-time buyers benefit from reduced SDLT with home purchases that don't exceed £500,000. First-time buyers purchasing their first home for £300,000 or less pay no SDLT, and if the purchase price is over £300,000 but does not exceed £500,000 they pay 5 per cent on the amount above £300,000.
A key issue with whether SDLT relief applies following inheritances is whether title in the property is transferred or assented to the beneficiary prior to sale. Where it does, which seems to be the case with your son as he will be a beneficial owner of the property, HM Revenue and Customs guidance is that first-time buyer relief will not be available.
To retain his entitlement to SDLT first-time buyer relief, your son needs to make sure that he does not become a beneficial owner of the property before it is sold. He should seek legal advice on this to confirm the position.
