SDLT and interaction with trust

Trusts Discussion
1

I’m dealing with a situation where a couple each placed 50% of their house into a family trust (two trusts therefore), allowing them to continue living there, but protecting the house from their estates (not IHT). The trustees of both trusts were the couple, the husband’s daughter and son-in-law. The trusts both stipulated that on first death within the couple, the surviving spouse can remain living in the house, but that the house will ultimately pass to the daughter on the second death, thereby allowing the full RNRB to be claimed. The value of the house is around £350k

The husband has since passed away and two separate transactions are underway.

  1. The surviving wife is selling the house and buying a new house - I believe that she will not have to pay the higher SDLT, even though the house is held in the trusts, as she remains the person benefiting from the property and it is a replacement of that main residence (although I would appreciate any thoughts / confirmation from others).

  2. The daughter (and her husband) are also moving - they have sold their main residence already and the purchase of their new house is progressing. This is the one I’m less sure about. Will they have to pay the higher rate SDLT as it will be viewed that she has an interest in another residence (and if so, will that be payable on the full purchase, as they are both trustees, or just her half as she is the named ultimate beneficiary (they are buying their new house as tenants in common)? Or will the ‘replacement of main residence’ rule still apply and mean the higher rate is not payable?

Any guidance or thoughts would be much appreciated.

Thanks

Zoe

2

Dear Zoe,

It is possible to own more than one property, but if replacing main residence, you can pay the lower rates of SDLT. I have successfully claimed this for a client. Actually he paid the higher amount and then we did the reclaim because he sold his main residence after the purchase of the new one. I see no issue with the daughter claiming this relief.

For the purposes of the trust, if the beneficiary has a life interest or interest in possession, they are treated as ‘owning’ the property for SDLT. As this would be a replacement of her main residence, then higher rates would not apply.

I hope this helps.

Lucy Orrow CTA TEP
Lambert Chapman LLP

3

Many thanks for the input, Lucy. This certainly seems to make sense to me.

Zoe