A client has 4 excluded property trusts holding shares in an offshore company. When that company buys a UK property the trust becomes subject to the UK relevant property regime.
My question is - do the 4 trusts become subject to the same day addition rules? My feeling is no because the wording of the legislation talks about an increase in value in the trust. Here, there is no increase in value (the trust value is the same) - just an increase of the value of relevant property (from £0 to £[25% of the property value]).
The same- day additions rule applies where there is a transfer of value, or more than one transfer of value, on the same day increasing the value of settlements made by the same settlor. So it would be necessary to understand how the company has been funded in order to buy the UK property before one can decide whether or not the new rule can apply. If a loan is being made, by whom and to whom?
The settlements will not of course become subject to the relevant property regime when the company buys a UK property under current rules. However that is, as we know, set to change from April next year.
And here is the problem with trying to simplifying a scenario for general comment. Apologies, I tried to keep the facts wide but have ended up drawing attention to the wrong aspects! Let’s say the property is already owned by the company, or even is already owned outright by the Trust, it was purchased many years ago using cash held…and it’s April 2017 (and the changes went through as planned)!
The point I was trying to establish was re SDA and whether “increase of value” includes an increase in the chargeable value if the trusts all become relevant property on the same day. Seeing the way you have written it, including the wording “a transfer of value”, seems to confirm that SDA would not apply to multiple trusts moving out of the excluded property exemption on the same and all being subject to the relevant property regime on the same day.
Agreed - there is no transfer of value where excluded property becomes relevant property, and so the same day addition rules will not apply in the circumstances you mention.