Home Forums Patrick Cannon Can the use of a bare trustee avoid the 3% additional rate of SDLT?

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  • #893 Reply
    Mr Bertrsm

    Good morning. In a recent purchase of a residential property a Bare Trust was used to ensure the beneficiary (and therefore purchaser) at the end of the day was a limited company rather than the Trustee, an individual. Full SDLT relief was claimed under FA03/Sch6A/Paragraph 3 (acquisition by a property trader from personal representatives). The SDLT form completed by the solicitor undertaking the conveyance failed to note the purchasor was acting as Trustee in box 57 and HMRC are now stating that the purchase was made by the individual at the end of the day and not by the limited company as beneficiary of the Bare Trust. Surely an error on the SDLT form can simply be amended? Thank you for considering the matter.

    #894 Reply

    In principle a simple error in box 57 if that is what happened could be corrected easily by filing an amendment to the return. However in order to persuade HMRC you will need fairly strong evidence to support the existence of a bare trust for the company at the time of purchase and to show that the company qualified for the relief. They may well ask why the property was bought in the name of an individual if a company was going to be the beneficial owner – can you explain this? If you file an amended return it is likely that an enquiry will be opened into the amended return by HMRC and so it might be worth sending copies of the supporting evidence to HMRC at the same time as filing the amendment. It would help also if your solicitor/conveyancer explained to HMRC why the mistake was made. It goes without saying that the evidence of the bare trust should be that which existed at the time of the acquisition and in most cases would consist of an executed trust deed, company minutes and a clear flow of funds from the company via the individual to the vendor. I hope this helps.

    #895 Reply
    Gareth Bertram

    Good afternoon and Happy New Year.

    The trust deed was executed on the day of purchase as is always the case for my company. We have undertaken purchases using bare trusts for 4/5 years and the flow of funds follow the path you have noted. My company has financial reasons for purchasing in this manner and the properties acquired are always shown on the balance sheet as reported in the annual accounts.

    I believed that HMRC were paid the wrong amount of stamp duty by my conveyancer and correspondence including documentation that I provided late last year resulted in a repayment of the SDLT tax back to my company, not me as an individual.

    The new and recent correspondence from HMRC states that the purchaser was me as an individual not the company so I believe that they are questioning the use of the bare trust based on sight of the contract for purchase which lists me the individual as the purchaser.

    I understand that SDLT is due ‘at the end of the day’ not the time that the contract is completed. I can therefore execute a Bare Trust after the purchase has taken place which transfers the absolute title and all income to the beneficiary which in this instance is my company on the same day. Is this interpretation correct?

    Thank you.

    #896 Reply
    Patrick Cannon

    Gareth, a Happy New Year to you too. I am concerned about the bare trust being executed after the completion of the purchase in your name – it would be normal in these situations for the bare trust to be executed before or simultaneously with completion of the purchase from the vendor. HMRC might argue that the equitable and beneficial ownership vested in you for a short period and by subsequently executing the trust you effected a transfer of the property to your company. You will need to persuade them that when you acquired the property it was already impressed with the bare trust that you executed later that day and explain why things were done in this order. If the funds came from the company then a resulting trust in its favour might already exist so this would assist your case.

    #897 Reply
    Justin Bryant

    The following extract from the Crest Nicholson case in the link below suggests that a bare trust deed should only be executed & delivered on or after acquisition of the relevant property by the bare trustee and not before.

    “…and the technical legal difficulty in creating a trust over property to be acquired in the future”


    #898 Reply
    Justin Bryant

    The DoT analysis in paras 49-51 of the recent case in the link below seems to confirm that written “retrospective” DoTs are fine in the absence of fraud, sham, undue influence and mistake.


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