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SDLT: Why Should an Incoming Trustee be Potentially Worse Off than an Incoming Partner? |
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Capital Tax Review by Matthew Hutton, MA, CTA (Fellow), AIIT, TEP Matthew Hutton MA, CTA (fellow), AIIT, TEP author of Capital Tax Review, points out a potentially nasty SDLT trap for trustees.ContextThe rules for responsible partners and responsible trustees, with the ability for each to appoint representative partners and relevant trustees to deal with SDLT compliance, are broadly much the same in Schedules 15 and 16 respectively to FA 2003. In particular, there was a nasty trap under Sch 15 para 7 for partners prior to FA 2004, though it remains under Sch 16 para 5 for trustees. That is, an incoming partner or trustee could be personally liable (SDLT liabilities being joint and several) for, in particular, payment of tax or interest on unpaid tax in respect of a land transaction occurring before he became a partner/trustee. The only limitation was that a penalty or interest on a penalty for such a land transaction could not be recovered from such an incoming partner/trustee.Relieving provision for incoming partnersFA 2004 inserted, with effect from 23 July 2004, new para 7(1A) to FA 2003 Sch 15. This has the effect that where a person does not become a responsible partner until after the effective date of a particular transaction on which tax remains unpaid with a continuing interest liability (or where an excessive repayment of tax has been made with power for the Stamp Office to recover under FA 2003 Sch 10 para 10), no such tax, interest on tax or recovery of excessive repayment can be demanded from him.Potential liability for incoming trusteesWhat is odd, however, is that FA 2004 inserted no equivalent provision into para 5 of Sch 16. What policy reason can there for this? Certainly, it was FA 2004 which inserted new part 3 of Sch 15 imposing very significant liabilities to SDLT in respect of, broadly, transfers of land to a partnership, transfers of partnership interests for a consideration and transfers of land from a partnership, but it is hard to see that a sensible relieving provision for incoming partners should not also be extended to trustees.CommentCrispin Taylor of the Stamp Office has been asked by the STPG why there is this anomaly between incoming partners and incoming trustees. The hope is that a relieving change will be made for trustees, though this cannot be guaranteed. The risk may be an outside one for an incoming trustee, though if both the trust fund were to fail and the continuing trustees to prove to be ‘men of straw’, he could find himself dipping into his own pocket.July 2005 Matthew Hutton MA, CTA (fellow), AIIT, TEP More InformationThe above article has been taken from Matthew Hutton’s Capital Tax Review, a quarterly update for professional advisers of private clients. For more information, visit http://www.taxationweb.co.uk/books/capital_tax_review.php.About the AuthorMatthew Hutton is a non-practising solicitor (admitted 1979), who has specialised in tax for over 25 years. Having run his own consultancy (latterly through Matthew Hutton Ltd) until 30th September 2000, he now devotes his professional time to writing and lecturing.Matthew Hutton’s Autumn Series of Estate Planning Conferences resume on 15 September 2005 in Stratford-upon-Avon. The dates and venues are listed below. Matthew Hutton’s Autumn Series of ConferencesThursday 15 September - Stratford Manor, Stratford-upon-AvonTuesday 20 September - Lord Haldon Hotel, Exeter Tuesday 27 September - Spa Hotel, Tunbridge Wells Tuesday 4 October - Wood Hall, Wetherby Tuesday 18 October - Renaissance Hotel, nr Derby For further details, brochures and booking forms please contact Matthew Hutton: email – This e-mail address is being protected from spambots. You need JavaScript enabled to view it or telephone – 01508 528388. |
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About The Author  Mark McLaughlin is TaxationWeb's Co-Founder, Director and Technical Editor. He is a Fellow of the Chartered Institute of Taxation and a member of the Association of Taxation Technicians and the Society of Trust and Estate Practitioners. He lectures on tax subjects, is co-author of Tottel's IHT Annual and Ray & McLaughlin's IHT Planning, and Editor of Tottel's Tax Planning and Annual series. Mark's work has also been published in Taxation, Tax Adviser, Tolley's Practical Tax, Tax Journal and Simon's Weekly Tax Intelligence. Since January 1998, Mark has been a consultant in his own tax practice, Mark McLaughlin Associates, which provides tax consultancy and support services to professional firms. He publishes a regular 'Tax Update' e-Newsletter for clients and other professional firms. To receive future copies, contact Mark via his website. |
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Article Added Saturday, 13 August 2005 |
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