Bare Trust with Non UK Domiciled Trustees

Evening All,

I have had a query from our clients who are domiciled in Italy and wish to purchase a property in the UK for their minor grandchildren who live in the UK.

I note the rules concerning offshore trusts and the rules surrounding inheritance, CGT and Income taxation on them, however, looking at it more simply, could the grandparents purchase by way of a Bare Trust so that the tax implications (including SDLT) are those of the beneficiary and not of the trustees? this would also do away with registering the trust with HMRC as a non resident trust would it not.

Your comments are welcome.

thank you


Yes and yes but you will need to consider the SDLT implications for the children. They will (I believe) lose their first time buyer rate and will be straight onto the second home rate if they later buy a property themselves.
Andrew Goodman
Osborne Clarke LLP

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Thank you.

Yes, you are correct, they would lose their first time buyer rate and something that i would need to look at.

Having responded once, I thought of a further problem: the parents of the minor children would be treated as the SDLT purchasers for the purposes of 4ZA (see Schedule 4ZA paras 11,12). If the parents already own a UK property, the purchaser by the bare trust would be subject to the additional 3%.

Andrew Goodman
Osborne Clarke LLP

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Do not forget to consider the Trust Registration position under 5AMLD.

Unless the trust is excluded under Schedule 3A (and as per guidance to date, bare trusts are not currently excluded automatically) then if this is a non-UK trust as an express trust where none of the trustees are resident in the UK, and the trustees acquire an interest in UK land, the trust will need to be registered on the TRS under 5AMLD.

Duncan McGowan
Stevens & Bolton LLP

For UK tax purposes it is the beneficiaries who are exposed whether it be income tax; CGT; or IHT. As pointed out above, if and when the minors buy their own property in the future, under current SDLT rules such purchases will not qualify as first time buyers.

Should the minors die pre age 18 their interests would pass under the UK intestacy provisions.

Presumably both trustees are neither UK resident nor UK domiciled.

It seems that the bare trust is not an “excluded trust” for TRS purposes [SI 2017/692 as amended Sch 3A para9] and does require registration whether it receives UK source rental income or not as the trustees have acquired an interest in land in the UK [SI 2017/692 as amended para 42(2)(b)(iii)(aa)]. The deadline for registration is on or before 10 March 2022 [SI 2017/692 as amended paras 45(3)(b) or 45ZA(5)(a)].

Regarding Andrew’s second post, I think that his point is in principle valid but in the present scenario the minors are the grand children not children [Sch 4ZA para 12].

Malcolm Finney

Thank you for all your comments regarding the registration. I will have a further look at this.

I was of the opinion that the SDLT would be that of the children’s as the grandparents would be the trustees with no involvement of the parents, however, I will give this a closer look.

Veronica you say in your last post:

But the posts above agree with this do they not?

Malcolm Finney