What are the SDLT consequences of holding on bare trust?
“Parents A and B, who already own one or more properties wish to assist their child C (and perhaps the C’s partner P) in the purchase of C’s only property.
The parents provide, for example, 30% of the property value towards the purchase.
C and P purchase the property and at the same time enter into a declaration of trust, setting out the beneficial ownership of the property, showing that A and B have a 30% interest in the property, although they are not the legal owners.
A and B are to receive 30% of the sale proceeds with the balance being divided in accordance with the terms of the declaration. The declaration normally provides that any mortgage secured on the property has to be repaid by C and P out of their share of the sale proceeds.
Since April 2016 is this an issue as C and P hold the property on bare trust for C, P, A and B on the terms set out in the declaration? C and P have no other property interests, but A and B are beneficial owners under the trust deed and do have other property interests.
Source: BLG Member
A bare trust is ignored for the purposes of the 3% surcharge and the beneficial owners are treated as joint purchasers. Where there is more than one purchaser the surcharge applies to the whole purchase transaction if it would apply in the case of any one of the purchasers. So that means that the surcharge will apply here because of A and B’s ownership of another dwelling (assuming that the other conditions for the surcharge are satisfied).
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.
Please refer to Ann’s free resource if you have any further stamp duty land tax questions. This resource covers a wide range of SDLT queries and you can filter the results to find a specific query.
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