SDLT complicated beneficial interest transfer

by **hdouglas@blg.co.uk** on Wed Apr 06, 2011 12:50 pm

Thanks in advance - excellent forum.

Property is held under an ancient multiple trust structure by 2 trustees for 6 beneficiaries.

One beneficiary now wishes to buy out 4 of the existing beneficiaries for £600K (that is, £150K per selling beneficiary).

If the trust (which was settled pre-SDLT etc.) is continued but with a new declaration of trust reflecting the exit of 4 beneficiaries and increased share of 1 of the remaining 2 beneficiaries, can SDLT be avoided?

Thanks.

by **section 44** on Wed Apr 06, 2011 2:04 pm

Assuming that it wouldn't be too complicated for us, what is the nature of the trust (or trusts)? Is it a bare trust, an interest in possession trust a discretionary trust or something else (hence do the beneficiaries have a beneficial interest in land for property law purposes)?

Are the trustees individuals or other persons?

by **hdouglas@blg.co.uk** on Wed Apr 06, 2011 5:49 pm

Thanks for you question.

The precise status of the trust(s) is a moot point but please assume that beneficiaries already have a beneficial interest in land for property law purposes (although I assume that beneficiaries would always have a beneficial interest, even before vesting - eg. prior to death of a life tenant, I thought beneficiaries still have an unvested beneficial interest?). But please do let me know if you do infact require further information on the status of the trust and I shall endeavour to dissect (I'm not a trusts lawyer!).

Trustees (who hold as tenants in common) are currently individuals.

I meant to add a subsidiary question which is: If SDLT is in fact payable, may a lower threshold rate be applied by transferring each 'selling' beneficiary's share separately? (I ask because trust assets were separately transferred in the 1970s under separate assignments, presumably due to some tax driver (albeit pre-SDLT).

Hearty thanks.

by **section 44** on Thu Apr 07, 2011 10:00 am

hdouglas@blg.co.uk wrote:I assume that beneficiaries would always have a beneficial interest

No. With a discretionary trust, for example, the beneficiaires under the trust would not have an interest in land for property law purposes.

by **hdouglas@blg.co.uk** on Thu Apr 07, 2011 11:50 am

Ah yes I see, thanks. Its not a discretionary trust.

Have you any thoughts on the substantive issue re. is sdlt payable and if so is there any way to avoid or mitigate?

thanks.

by **section 44** on Thu Apr 07, 2011 11:58 am

If a trust interest is a beneficial interest in land then it is within the scope of SDLT.

by **hdouglas@blg.co.uk** on Fri Apr 08, 2011 3:45 pm

Most kind, thankyou.

Is it possible to charge sdlt at a lower rate by attributing the purchase of beneficial interests to each of the 4 sellers in small chunks rather than aggregating to one large purchase which attracts a higher rate?

by **section 44** on Fri Apr 08, 2011 4:14 pm

are the beneficiaries connected with each other (spouse/relative?)

by **hdouglas@blg.co.uk** on Fri Apr 08, 2011 4:50 pm

This is older generation aunts and uncles selling to younger generation nephew, albeit at arms length, independent market valuation basis.

There has been a father to son transfer of some smeall beneficial interest but this was legitimately done for no consideration.

by **section 44** on Fri Apr 08, 2011 5:03 pm

Relative means: brother, sister, ancestor or lineal descendent (hence not aunt, uncle, nephew, niece).

Any acquisitions between connected persons are linked transactions and therefore liable to SDLT by reference to the rate determined by the aggregate consideration given for all such linked transactions.

Any acquisition by unconnected persons are not linked transactions even if they form part of a single scheme, arrangement or series.