Buying or selling a beneficial interest in a Settlement

Trusts Discussion
1

Settlor of Relevant Property Trust has died.

Only asset is house worth £400,000.

The two beneficiaries have agreed to buy/sell the other’s interest for £200,000.

We probably have to appoint the property out of the trust for buyer to get a mortgage and so would do that to the two bens in equal shares.

That means the buyer pays SDLT on the half value of the property that he is buying. Is that correct? He owns no other property so no additional rate to pay. It’s not the end of the world.

Is it possible to avoid the SDLT by him buying out the other’s interest in the trust and then appointing the property out 100% to the buyer (subject to working out the security issue) or is that just evasion?

I don’t want to miss a legitimate solution but even less do I want to be engaging in dodgy dealings.

i guess this must have come up before but I could not find it on the forum.

Thank you

2

I would say that this plan is caught by s 75A FA 2003. The trustee is V and the purchaser of the settlement interest is P. The notional transaction is a transfer by V to P of the land for the consideration paid by P to the seller of the beneficial interest in the trust. That is a scheme transaction and is ignored. See SDLTM09050, especially 09160-70.

Jack Harper

3

Thank you for that. SDLT it is