SDLT - Property held on bare trust for a minor

(victoria.motley) #1

My client is a bare trustee for her minor son of funds inherited from his late father’s estate. It is not subject to the statutory trusts and is an absolute entitlement which he will become entitled to at age 18.

She wants to invest some of the funds in a rental property . She personally already owns her own home and rental properties.

Having read the new stamp duty provisions there is a clause (3.39) which states that where a minor is entitled to property as the beneficiary of a bare trust it is treated as a property owned by the parent.

I am not clear on reading the provisions whether the 3% additional stamp duty would apply to the situation here where my client is purchasing a property as trustee for her son or whether it would only apply if my client purchases another property herself.

Victoria Motley
Forbes Solicitors

(Raymond Magill) #2

Assuming the Bill becomes law as drafted, Schedule 4ZA paragraph 12 makes clear that the child’s parent is treated as the purchaser. So the higher rate would apply.

Ray Magill

(Julian Cohen) #3

Is there some scope for planning in this? Is it the case that the parent is treated as the purchaser and the child is not?

Julian Cohen

(victoria.motley) #4

When I read the provisions it wasn’t clear that it would operate this way round (i.e. where the child is purchasing) but it seemed that it would the other way around (i.e. where the parent was purchasing but the child already owned a property - regardless of whether the parent was the trustee).

Thanks for the reference Ray, I will go back and look again at the regulations. I suspect that you are right that the higher rate will apply as it is clearly aimed as a deterrent for people putting properties into the names of their children. In this case however, it might hinder investing in something which might be beneficial for the child in the longer term. He is currently in his teens and this would provide either an income for him whilst studying or a first home once finished. The higher charge would of course not apply after he turns 18 as it would then be his only property. It seems like an unjust penalty in these circumstances.

Victoria Motley
Forbes Solicitors

(duncan.mcgowan) #5

Clause 5.7. A bare trustee purchaser is ignored for the purposes of determining whether a purchase is subject to the higher rates, the absolute beneficiary or beneficiaries are treated as the purchaser or purchasers56.

Duncan McGowan
Rawlinson & Hunter

(victoria.motley) #6

Thanks for the response. That is correct, but where the beneficial owner is a minor I believe that the parent is treated as having an interest. Therefore, if a bare trustee owns a property for a minor beneficiary, if the parent of that beneficiary wants to purchase a property they are treated as already having an interest in a property by virtue of being the parent of a minor with an interest. I wanted to know whether it works the other way round as well so that where the trustee wants to purchase a property with bare trust fund for a minor do they need to consider what property interests the parents of the child already have and if they own a property does the trustee need to pay the higher rate.

Victoria Motley
Forbes Solicitors

(duncan.mcgowan) #7

While not expressly clear from the legislation my understanding agrees with that of Ray, in that as a Bare Trust purchaser one looks at the absolute beneficiary. If that beneficiary is a minor, then as per Paragraph 12 ( then we treat that interest as being purchased by the child’s parents. If the child’s parents already own a property at the end of the day of purchase then the higher rates would apply to the purchase being made on behalf of the minor.

Given the child would presumably still continue to live with their parents until turning 18 and it would not be used as their main residence, then as commented while it may seem like an unjust penalty this regulation is doing exactly as the government presumably appears to want in that it is attempting to discourage people from using residential property as an investment vehicle by imposing additional charges.

Duncan McGowan
Rawlinson & Hunter


Following on from this question in 2016. Is the position any clearer about the SDLT?

Also I have the quandary where home made Will divides residue between 5 named minor beneficiaries who are grandchildren. Their mothers (2) are Personal Representatives (Trustees). There is no age contingency so appears to be a bare trust.

One parent has asked that her children’s’ shares (she is mother to 3) is invested in a property. The youngest is 4 years old. The eldest child of the other mother (of 2 children) will soon be 18 and entitled to his share.

Can the fund be separated for the purpose of buying a property? I have many issues going around in my head but cannot really pin it down.

Any pointers would be greatly appreciated.

Kathy Melkerts
Melkerts Solicitors