SDLT and French Nu-Propriété: Does Bare Ownership Count as Owning a Property?

If you or your spouse holds a French nu-propriété (bare ownership) interest in a dwelling and you are now purchasing a home in the UK, you are dealing with an area of Stamp Duty Land Tax (SDLT) higher rate policy that is not directly addressed in SDLT legislation or have addressed by the HMRC’s published guidance. The practical question is whether that French bare ownership counts as “owning a property” and therefore having a “major interest” for the purposes of the SDLT higher rates test in Schedule 4ZA of the Finance Act 2003 (the “Act”), and if it does, whether the 5% surcharge applies to your UK purchase. On a £650,000 acquisition, the difference between standard residential rates and higher rates is currently £32,500, so this is a point that needs to be analysed before completion rather than left as an assumption on the conveyancer’s file.

This article explains how HMRC assesses overseas ownership for the higher rates test under Schedule 4ZA of the Act, why French nu-propriété does not map cleanly onto the English-law concept of a “major interest”, and how that affects SDLT on your UK purchase. It also sets out the practical steps a buyer should take before completion where a French bare ownership interest is in play, including valuation, attribution between spouses, and documenting a defensible filing position.

What this article does not cover is straightforward UK second-home purchases with no overseas complications. If your position is limited to a UK main residence and a UK second home, and you do not hold any overseas interests, our SDLT calculator and SDLT Higher Rate Advice page will usually give you a faster answer than the detailed analysis in this article.

What Nu-Propriété Means and Why It Creates an SDLT Problem

Nu-propriété literally “bare ownership” is a creation of French civil law construct that has no direct equivalent in English property law. The bare owner, or nu-propriétaire holds the underlying ownership of the property but has no right to occupy it, to let it, or to take any income from it. The practical rights of use and income belong to the usufructuary (usufruitier), typically for life or a fixed term. When the usufruct ends, usually on the death of the usufructuary, the bare owner becomes full owner without further transfer of title.

The structure is widely used in French estate planning. A parent often gifts the nu-propriété to a child while retaining the usufruct, allowing the child to inherit the property outside the parent’s taxable estate. The SDLT difficulty arises because Paragraph 2 of Schedule 4ZA of the Act defines a “major interest in a single dwelling” by reference to freehold estates and leasehold estates originally granted for more than seven years under English law. Nu-propriété is neither. Nu-propriété is a real, registrable property right under French law, but it does not neatly fit either category: the bare owner has future enjoyment (revisionary interest) but no current occupation or income, while the usufructuary has present enjoyment but not the underlying title. This mismatch is the starting point for the higher rate analysis.

The SDLT Higher Rate Test: What Schedule 4ZA Actually Requires

The 5% surcharge increased from 3% on 31 October 2024 under the Autumn Budget 2024 measures and brought into law by Finance Act 2025 applies to a UK residential purchase when four conditions, set out at Paragraph 3 of Schedule 4ZA of the Act, are all met. These are Conditions A, B, C, and D.

For the purposes of Condition C, a “major interest” is defined in Paragraph 2 of Schedule 4ZA of the Act as a freehold estate or a leasehold estate originally granted for a term of more than seven years. HMRC’s SDLT Manual including SDLTM09730 and SDLTM09780 states that for overseas property, the foreign-law interest must be equivalent to one of these English-law major interests for Condition C to be satisfied.

Two further rules are particularly relevant in French bare ownership cases.

Does Nu-Propriété Satisfy the “Major Interest” Threshold?

This is the question every taxpayer in this situation wants answered. The honest answer is that HMRC has not addressed it directly. The analysis turns on whether nu-propriété is “equivalent” to a freehold estate, or to a leasehold estate originally granted for more than seven years, under English law. There are arguments both ways and the answer is fact specific.

From a legal-structural perspective, the bare owner under French law holds the underlying title to the property. The bare ownership is capable of being sold, gifted or mortgaged, and it passes on death. When the usufruct ends, the bare owner automatically becomes full owner without a further conveyance or French transfer duty. On this view, nu-propriété can be seen as a freehold subject to an encumbrance, in the same way that an English freehold subject to a long lease remains a major interest for SDLT purposes. A strict legal comparison therefore supports an argument that the bare owner has an interest equivalent to a freehold estate.

On a practical rights analysis, the bare owner has none of the key incidents of ownership during the life of the usufruct: no right to occupy, no right to let, no right to rental income, and no realistic route to recover possession. The closest English-law analogue is often a remainder interest under a life-interest trust, where the life tenant holds the present rights of occupation and income, and the remainderman holds a deferred interest in the property. HMRC does not generally treat a remainderman as owning a major interest in the dwelling for higher rate purposes while the life tenant remains in occupation, because the remainderman’s rights are purely future. By analogy, a bare ownership interest with no current enjoyment may be argued not to be equivalent to a major interest in an English dwelling.

In practice, two further considerations often influence the conclusion. First, the origin of the arrangement matters: whether the bare ownership arose from a gift, inheritance, or sale, and the extent to which the bare owner’s ability to dispose of or encumber their interest is restricted, can affect the legal characterisation. Second, the SDLT analysis is distinct from any position under the UK–France double tax treaty for income tax or inheritance tax; treaty characterisations do not determine the Schedule 4ZA test.

In many cases where the usufructuary is alive, the bare owner receives no income, has no occupational rights, and cannot realistically recover possession during the usufructuary’s lifetime, a defensible working position is that the interest is not equivalent to an English-law major interest and that Condition C is not met. However, this is not a general rule; it is a conclusion that needs to be documented with reference to the specific French documentation and the Schedule 4ZA provisions in a written professional opinion before completion.

Three Scenarios: How the Answer Changes Depending on Your Arrangement

The same statutory framework can produce very different SDLT outcomes depending on the facts of the French and UK transactions. The following scenarios illustrate patterns that frequently arise in practice.

Worked Example: SDLT on a £650,000 UK Purchase

Assume a buyer is purchasing a residential property in England for £650,000 after 1 April 2025. The buyer, or their spouse, holds French nu-propriété in a residential property. The UK purchase is not a replacement of the buyer's only or main residence, the non-UK resident surcharge is ignored, and no transitional 3 percentage point rules apply.

If the French bare ownership is not a major interest, standard residential rates apply. If it is a major interest worth £40,000 or more, the higher rates apply. The calculation is as follows.

On these figures, the difference between standard and higher rates is £32,500. That difference demonstrates why the classification of nu-propriété should not be left to a generic calculator or assumed by a non-specialist.

These figures are illustrative. The correct SDLT calculation depends on the specific facts, the legal form of your French arrangement, the supporting valuation evidence, and the exchange rate at the effective date of your UK transaction.

What HMRC Has and Hasn’t Said About Overseas Bare Ownership

HMRC’s published guidance on the higher rate test is set out in the SDLT Manual, including SDLTM09730, SDLTM09740, SDLTM09780, SDLTM09812, and SDLTM09820. These sections confirm that the higher rates apply equally to overseas dwellings, that there is no jurisdictional exclusion, and that the £40,000 threshold is applied to the value of the interest held at the effective date rather than the full value of the underlying property. They also explain that for overseas interests, the test is whether the foreign-law interest is equivalent to a major interest under English law; where it is, Condition C is met, and where it is not, Condition C fails even if the underlying property is plainly a dwelling worth significantly more than £40,000.

There is, however, no HMRC guidance that addresses French nu-propriété specifically or that provides a worked example for split structures where current enjoyment and legal title are separated between two parties. HMRC has not published a clearance route that gives a binding pre-completion answer on whether a particular foreign-law interest is a major interest for Schedule 4ZA. The non-statutory clearance service can be used in some cases, but it is not designed to offer blanket certainty on every fact pattern and requires a clearly articulated position to be put forward. The absence of explicit HMRC guidance does not mean the rules do not apply; it means that the necessary characterisation and valuation work must be done by the taxpayer’s adviser, and the reasoning recorded, in order to support the SDLT return if HMRC opens an enquiry.

What Should You Do Before Your Completion Date?

If your situation involves a French bare ownership interest and a UK residential purchase, the most important work takes place before the SDLT return is filed. Once a return is submitted, you are correcting an existing position rather than making a clean decision on the facts. A pre-completion review should cover at least the following steps.

Conclusion

If your position involves a French nu-propriété interest whether held by you, your spouse, or a joint purchaser this is not a scenario where a generic SDLT calculator is likely to give the correct answer. The higher rate test in Schedule 4ZA of the Act sits at the boundary between English property law and French civil law, and the outcome depends on legal characterisation, valuation and the attribution rules for spouses and joint purchasers. Paying the higher rate when it does not apply can mean overpaying by tens of thousands of pounds, while filing at standard rates when the higher rates should have applied can lead to interest, penalties and the cost of defending an HMRC enquiry. A reasoned SDLT position on French nu-propriété, set out before completion and recorded in a written opinion, is often the difference between a routine filing and a protracted dispute.