Does the 3% SDLT surcharge apply where the purchaser has a beneficial interest in a dwelling occupied by a family member?


“My client is buying a flat. He is a young adult and this is ostensibly a first purchase. However, in 1992 his parents declared a trust of the matrimonial home in favour of him and his sister, then minors. They subsequently divorced.  A Court Order was made affecting the property stating a tenancy in common to mother and father but if father breached the terms of the Order, the property would be mother’s. It was acknowledged by a deed made in 2002 that the Order had been breached and father no longer had an interest in the property, but it also confirmed the trust in favour of the children (still minors) made in 1992.  Mother has continued to live at the property throughout.

A transfer has now been made by mother and father (the ex) in favour of the children but cannot be completed because there is an outstanding mortgage on the property.  The property has been on the market for sale for a year but no one is interested in buying.  So, son is going ahead with his purchase anyway. He has a 50% beneficial interest in the former matrimonial home.  We have advised that he will be caught by the additional SDLT rules, but I was wondering if there is any way round this in the particular circumstances.

Mother has suggested a revocation/variation of the trust with the children’s cooperation – I have not considered the implications as far as the ex is concerned (who is difficult to contact) if the transfer to the children has not been perfected in the first place.”

Source: BLG Member 


As the son has a major interest in the dwelling in which his mother is living the 3% surcharge will apply.  A beneficial interest is sufficient for this purpose and, in this case, the legal owner(s) will be holding as bare trustee(s) for the two children.  I assume that the son’s interest is worth £40,000 or more.

Does the mother have any legal right to remain in the property at present?  If the mother is granted a lease for more than 21 years the additional rate will not be applicable to the son’s purchase.  This may be a good idea if the property cannot be sold and can be done for no consideration if the children are agreeable.  It could be easier than revoking or varying the trust.

At the time of publication this response was correct however as tax legislation and practice change from time-to-time you should take specific advice before taking any action.

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