How does the 3% surcharge apply where there is a discretionary trust?
3% Additional Rate, Settlements, Trustees
“We are acting on behalf of clients selling a property. The property is registered in the four names as trustees of a discretionary family trust. The Settlors are mum and dad. The Trustees are mum, dad and their two adult children. One of the children owns her own property and the other may wish to purchase as a first time buyer in the near future. If they purchase a new property in the name of the trust (all four names would appear on the Register as Registered Proprietors), would the higher rate of stamp duty land tax be payable and would the first time buyer then have to pay the higher rate of stamp duty land tax when she comes to buy?”
Source: BLG Member
Assuming that a dwelling is being purchased for more than £40,000 with vacant possession, the higher rate of SDLT will always apply as the trustees of a discretionary trust are treated in the same way as a company purchaser for the purposes of the 3% surcharge.
The first-time buyer will be buying in a non- trustee capacity and the holding as trustee will be ignored.
The author of Sergeant & Sims on Stamp Duty does not agree with the final sentence of this answer. His view (at AA39A) is that:
…’where the trustee is taken to be the purchaser (and owner) of a dwelling that is trust property for the purposes of the higher rates (because he is the trustee of a discretionary trust), then the dwelling will count when determining whether a dwelling purchased by the trustee personally is subject to the higher rates’.
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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