What are the stamp duty land tax implications for transactions involving trusts?

A trust can be created in different ways and for a wide range of purposes. Indeed, within the context of property law, a trust is automatically created whenever a property is jointly owned by more than one party.

So far as Stamp Duty Land Tax involving commercial property is concerned, all trusts in land are classed as either (1) 'Bare trusts' (where a property is held on behalf of a beneficiary/beneficiaries) or (2) 'Settlement trusts' (being any other arrangement including, for example, interest in possession trusts, maintenance trusts and discretionary trusts).

Bare trusts

With bare trusts, the general rule is that the beneficiaries of the trust are considered to be owners of the property for SDLT purposes. Therefore, responsibility of submitting an SDLT Return and paying any SDLT due ultimately falls to the beneficiary and not the trustees.

This means that a transfer of property from the trustees to the beneficiary does not qualify as a land transaction for SDLT purposes, because the beneficiary has already been treated as the property owner when the property was originally acquired.

Settlement trusts

Where settlement trusts are concerned, the SDLT rules deem the trustees as the owners of the legal and beneficial interest. Therefore, the onus is on the trustees to submit a SDLT Return and pay any SDLT due.

Unlike bare trusts, this means that a transfer of property from the trustees to the beneficiary will be classed as a land transaction for SDLT purposes. HMRC has also confirmed that a change of trustees (where no consideration is usually paid) is not a notifiable land transaction, although if there is a mortgage over the trust property then this may result in an obligation to submit an SDLT Return and pay SDLT.

With regard to signing the SDLT Return, the general position in property transactions is that an SDLT Return is to be signed by all purchasers. However, where an SDLT Return is to be submitted by the trustees (ie. under settlement trusts), it can be signed by one of the trustees on behalf of the trust.