Qualifying as first time buyer status if wife has shares in a French SC (société commerciale)

[Franglish]

Hi all.
I can’t seem to find a definite answer anywhere so I thought I would post here. My wife and I are about to buy our first house here in England. We thought we qualified as first time buyers and would get stamp duty relief but it seems that the fact that she owns shares in her parents’ home in France makes it impossible. She is French but a uk resident. An SC ( société civile) was created 10 years ago and is shared between her parents, brothers and herself. It’s quite a common scheme in France to alleviate inheritance tax and to protect an asset. Technically she is a shareholder in a company that owns the house now. I think this is the important detail and means I get conflicting answers when doing my research.. Her parents have the usufruct until they die and she does not commercially benefit from anything. Her share is valued at around 100000 euros. Has anyone come across this type of issue before and if so, is it worth spending time, precious nervous energy and money trying to convince hrmc that we might still qualify as first time buyers? If yes, what exact help should we be looking for? A UK based accountant specialising in French law? Am a bit a lost. We now realise we don’t only not qualify as first time buyers but we will have to pay the stamp duty as a second home which has put a considerable strain on our initial budget…
Thanks for taking the time to read this.
Phil

[AGoodman]

If her only interest is in the shares of the SCI then she is not treated as owning an interest in the property.

You also mention a usufruct but not whether the usufruct is over the shares or the property itself. If your wife is just the bare owner of the shares, that's fine. If she is the bare owner of the property itself, that is more complicated - although it may also be okay.

[AGoodman]

Sorry, i see it's an SC rather than an SCI. ignore the above.

A bare title subject to a usufruct should not count as ownership but the position is not entirely clear as we do not have usufructs in English law. we therefore have to rely on analogies to trusts and HMRC guidance, which is lacking.

If you wanted to save time, you could say that she is a first time buyer but declare elsewhere on the return that she has a bare interest in a property subject to a usufruct. That protects you from penalties. If hmrc dispute it, you can decide whether you want to fight it or not.

[Franglish]

Hi A Goodman,

Thank you so much for taking the time to answer this query. For the moment all I have been asked to do via my solicitor is to tick boxes on a form called “SLDT property questionnaire and confirmation declaration”. 6 different questions to answer yes or no to.

The 2 that are relevant to your answer are:

1- Are you a first time buyer? (You are a first time buyer if you have never within your lifetime owned or even been on a mortgage of any property in the world, either solely, jointly with others or as a trustee or beneficiary.)
I am assuming you are saying I should answer NO to this one. I am a bit thrown by the wording, especially the word “trustee”..

2- When we complete the purchase, will you or your spouse or civil partner (if any), who is not a party to this transaction own any interest in, or are you in the course of purchasing any interest in, a residential property anywhere in the world?
In this case I am lost as to what I would need to answer as i am wondering if her shares in the SC constitutes to “owning interest” in a residential property anywhere in the world.

Sorry I am a bit confused by the wording they use and really don’t want to get it wrong..

Again thank you for taking the time to answer.

If you feel I am asking too much or that it is stretching your knowledge, could you indicate which kind of professional help I should be seeking? The solicitor I am using for buying the house is of the opinion that I don’t qualify as a first time buyer but has said that it might be worth looking into as his knowledge is limited in that domain.
Regards,
Philip

[Franglish]

So sorry. I have just realised i wrote Société Commerciale but i meant Société Civile!!!

[Franglish]

Hi all.
I can’t seem to find a definite answer anywhere so I thought I would post here. My wife and I are about to buy our first house here in England. We thought we qualified as first time buyers and would get stamp duty relief but it seems that the fact that she owns shares in her parents’ home in France makes it impossible. She is French but a uk resident. An SC ( société civile) was created 10 years ago and is shared between her parents, brothers and herself. It’s quite a common scheme in France to alleviate inheritance tax and to protect an asset. Technically she is a shareholder in a company that owns the house now. I think this is the important detail and means I get conflicting answers when doing my research.. Her parents have the usufruct until they die and she does not commercially benefit from anything. Her share is valued at around 100000 euros. Has anyone come across this type of issue before and if so, is it worth spending time, precious nervous energy and money trying to convince hrmc that we might still qualify as first time buyers? If yes, what exact help should we be looking for? A UK based accountant specialising in French law? Am a bit a lost. We now realise we don’t only not qualify as first time buyers but we will have to pay the stamp duty as a second home which has put a considerable strain on our initial budget…
Thanks for taking the time to read this.
Phil

[AGoodman]

I hadn't come across a societe civile before but HMRC appear to treat it as akin to a company rather than a partnership: https://www.gov.uk/hmrc-internal-manuals/international-manual/intm180030 (note the mention of "opaque" rather than "transparent". I havent come across them before but it does appear to be a company provided it is registered with the French register of companies.

On that basis, if all your wife owns is a share in the SC, then she should not be considered to have an interest in the property. That is very different to owning a share in the property itself.

That is more than a technical difference; in the same way that somebody with shares in an English company does not have an interest in a property held by the company.

I'd suggest you first confirm the ownership structure - if the parents own the usufruct then confirm who holds the bare title.

If her interest is limited to shares in the SC then go back to your solicitors and ask them to confirm and explain their answer. They may have misunderstood if you told them she owns a share of the property itself but it is actually owned by the SC.

[someone]

You can try ringing HMLR. I found them very helpful when I put a property into joint names with my wife (including a mortgage) just after the change that meant that transfers for consideration between H&W were not subject to the second property SDLT rate as to what (the solicitors) should put in each box on the form. It was a significant time ago now so I don't recall exactly what had to be done but it was something along the lines of "answer that it's your only property" (which was what was needed to get the SDLT correct even though it wasn't technically true)

They might be able to help you here too. Tell them that your partner has an interest in a usufruct and that you've been advised that that doesn't matter for SDLT and first time buyer purposes and you want to know what you should tell your solicitor WRT these questions.

The problem is that the solicitors will just transfer your answers to the software they use to calculate the SDLT and then will say "you owe X" which is whatever their software calculates based on those answers.

So in the example of my wife and I it was around 150GBP of SDLT owed (I knew the exact amount it should be) but the solicitors gave values from 0 to 3k. Once I'd talked to HMLR I said "I've spoken to HMLR team 25 (or whatever it was) and they've said I should answer like this..." (and the solicitors accepted that) and lo and behold the SDLT that came out of their software matched what I had said the amount was supposed to be.

I would expect that HMLR will tell you to answer "YES" to both of those questions. I think what AGoodman is saying is that under English law a usufruct would not be considered an interest in property. (BICBW, I don't know what a usufruct is)

You can see what the SDLT1 return looks like here:
https://www.legislation.gov.uk/uksi/2021/13/made/data.xht

I can't find the SDLT2 form so I'm not sure what data can be put on it but it's quite likely there is no "white space" notes. So if you want to protect yourself as AGoodman suggests then your best bet is to ask the solicitors for the SDLT reference when they submit it and then write to HMRC referencing that submission and saying that you have an interest in a usufruct.

(AGoodman has replied while I was composing this so it might not be completely relevant but I'm posting it anyway in case it helps)

[Franglish]

Thank you both for these really interesting and helpful answers. I need to “digest” it all as I need to find the exact definition of terms such as usufruct and bare ownership in British legal terms, in order to be able to compare what is on the French paperwork we have. What I do know is that my wife owns shares in a company that owns what use to be her parents’ house. These shares are divided in 6 parts. Half of the shares belong to her parents and the other half is split between 3 siblings- including my wife. The main clause is that her parents live there rent free and pay for all bills for as long as they are alive and nothing else can be done with the house. I hope I can come to a conclusion of some sort and if not I might come back and pick your thoughts again!
Kind regards,
Philip.

[Franglish]

Hi A Goodman,

I’m back picking your brain again as I’m still not sure who I can turn to professionally and because I would like to have a level of certainty before engaging in possible procedures to prove our case in relation to HRMC.

In response to what i read in your previous answer + copied and pasted below- and before I speak to the solicitor:

“I'd suggest you first confirm the ownership structure - if the parents own the usufruct then confirm who holds the bare title.”

I got some answers from my wife’s French brothers that I have translated and interpreted as best i can based on the fact that there isn’t usufruct in English law and based on the fact that you mentioned in a previous message that therefor we have to rely on analogies to trusts and HRMC guidance, which is lacking…

The SC holds the bare titles and the parents have the usufruct meaning they are the only shareholders allowed to benefit in any way (essentially living there I’m assuming). My wife only owns shares in the company and does not have any benefit in the usufruct whatsoever.

Could you confirm we are on the right path?
Again thank you so much for all the help. It’s really invaluable at the moment!
Kind regards,
Philip.