SDLT and Appointment Out of Discretionary Trust

Client’s father left a will with a discretionary trust element into which all assets that were eligible for APR and BPR were placed. My client and his siblings are potential beneficiaries of this trust.

The assets are farmland and a farm-worker’s cottage. Client’s father also left a letter of wishes expressing the wish that the aforesaid assets pass to my client on the basis that he pays a sum of money to his sisters. He is happy to do that and on that basis the trustees will appoint the assets out of the trust to my client. The trustees would not make the appointment otherwise.

For SDLT purposes my client will be acquiring a chargeable interest. Would the payment to his sisters fall within FA2003/Sch16/Para 7 - consideration for exercise of power of appointment or discretion (SDLTM31760) so that the payment to sisters will be treated as consideration for the acquisition and be liable for payment of SDLT on the amount of the payment.

James Anderson
Jeffreys & Powell Solicitors

Chargeable consideration is defined by s50 and Sch 4 FA 2003 and para1 of the latter says:“1(1)The chargeable consideration for a transaction is, except as otherwise expressly provided, any consideration in money or money’s worth given for the subject-matter of the transaction, directly or indirectly, by the purchaser or a person connected with him”. The operative issues are thus whether it was given “for” or “by” as described. It does not matter to whom it is paid or how it was funded.

Para 7 of Sch 16 extends the concept where “any consideration [is] given for the person in whose favour the appointment was made or the discretion was exercised becoming an object of the power or discretion.”. Without that it might be arguable that a payment made to put a person in the appropriate position to benefit was not given “for” the subject-matter of the transaction. It still does not matter to whom that extended type of consideration is paid or how it is funded.

Jack Harper

Thanks for the reply. That was my thinking.

James Anderson
Jeffreys & Powell Solicitors