SDLT Guidance: Non-Resident Transactions for Bare Trusts and Settlements Explained

How the non-resident SDLT surcharge works for certain trust purchases of dwellings

In some trust purchases of residential property, the non-resident SDLT surcharge is worked out by looking at the beneficiary’s residence status rather than the trustee’s. This mainly affects two cases: a bare trustee taking a new lease, and a trustee of certain settlements where a beneficiary has a right to occupy for life or to receive the income. Even where the beneficiary’s residence status is used, the trustee may still be the person responsible for the SDLT return.

• For a bare trust, the special rule applies only where a new lease of a dwelling is granted to the bare trustee and the relevant SDLT lease rule applies.
• For certain settlements, the rule applies where a beneficiary is entitled to occupy the dwelling for life or is entitled to the income from it.
• In these cases, the key test for the non-resident surcharge is the residence status of the beneficiary or beneficiaries, not the trustee.
• The trustee can still remain the chargeable person for SDLT and may still have to file the SDLT return.
• The rule does not apply to all trusts, and settlements under a unit trust scheme are excluded.
• Correctly identifying the type of trust is essential, because the SDLT surcharge result can change depending on the trust structure.

Scroll down for the full analysis.

How the non-resident SDLT surcharge applies to certain trust purchases of dwellings

This page explains a narrow but important point in the SDLT rules for the non-resident surcharge. Where a dwelling is bought through certain types of trust, the key residence test may be applied by looking at the beneficiary, not the trustee. That can affect whether the surcharge applies, even though the trustee may still be the person legally responsible for the SDLT return.

What this rule is about

The source material deals with two specific trust situations under Schedule 9A to the Finance Act 2003:

• a bare trustee taking a new lease of a dwelling; and
• a trustee of a settlement buying a dwelling where a beneficiary is entitled to occupy it for life, or is entitled to the income from it.

These rules matter because the non-resident surcharge depends on whether the transaction is a “non-resident transaction”. In ordinary cases, that question is answered by looking at the purchaser. Trusts complicate that analysis, because the legal purchaser and the person with the real economic interest may not be the same person.

The legislation therefore contains special rules telling you whose residence status to test in these trust cases.

What the official source says

The manual distinguishes between different kinds of trust.

A bare trust is a trust where the beneficiary is absolutely entitled to the property as against the trustee. It also covers cases where the beneficiary would be absolutely entitled but cannot hold legal title because of age or disability.

In general SDLT terms, a bare trustee is often looked through so that the property and the trustee’s acts are treated as those of the beneficiary. But that general treatment does not apply in the same way when the transaction is the grant of a lease. Under paragraph 3(3) of Schedule 16 to the Finance Act 2003, where a lease is granted to a bare trustee, the trustee is treated as the purchaser of the lease for SDLT purposes.

Even so, paragraph 13 of Schedule 9A says that for the purpose of deciding whether the non-resident surcharge applies, the residence status to test is that of the beneficiary or beneficiaries, not the bare trustee, if:

• the transaction is the grant of a lease of a dwelling or dwellings;
• the purchaser includes a person acting as trustee of a bare trust; and
• paragraph 3(3) of Schedule 16 applies.

The source then turns to settlements. For SDLT purposes, a settlement means any trust arrangement other than a bare trust.

It highlights two types of settlement:

• a life interest trust, where a beneficiary is entitled to occupy the dwelling for life; and
• an interest in possession trust, where a beneficiary is entitled to the income from the dwelling.

Where a trustee of this kind of settlement buys a dwelling, paragraph 14 says that the non-resident transaction test is determined by reference to the beneficiary’s residence status, not the trustee’s. But the trustee remains the chargeable person for SDLT and remains responsible for filing the SDLT return.

The source also states that this rule does not apply to settlements under a unit trust scheme. For SDLT, unit trust schemes are dealt with under a separate statutory treatment.

What this means in practice

The main practical point is that you must separate two different questions:

• who is the purchaser or chargeable person for SDLT administration; and
• whose residence status is relevant for the non-resident surcharge.

Those are not always the same person.

In a bare trust taking a new lease, the trustee is treated as the purchaser for SDLT purposes because of the special lease rule. But for the surcharge, you do not stop there. If paragraph 13 applies, you look through to the beneficiary or beneficiaries to decide whether the transaction is a non-resident transaction.

In a life interest or interest in possession settlement, the trustee is still the person who files the SDLT return and is charged to SDLT. But for the surcharge question, paragraph 14 again directs you to the beneficiary or beneficiaries.

This can make a real difference. A UK-resident trustee buying for a non-UK resident beneficiary may still face the surcharge if the beneficiary’s residence status produces a non-resident transaction. Equally, a non-UK resident trustee may not trigger the surcharge if the relevant beneficiary or beneficiaries satisfy the residence test.

How to analyse it

A sensible way to approach the issue is to work through the following questions in order.

1. Is the property a dwelling, and is there a chargeable transaction?

The rules discussed here only matter if the transaction is within the dwelling surcharge regime in Schedule 9A.

2. What kind of trust is involved?

• If the beneficiary is absolutely entitled, it may be a bare trust.
• If it is not a bare trust, it may be a settlement.
• Within settlements, ask whether a beneficiary has a life interest in occupation or an interest in possession in the income.

This classification matters because paragraphs 13 and 14 apply in different situations.

3. If it is a bare trust, is the transaction the grant of a lease?

Paragraph 13 is aimed at the case where a lease of a dwelling is granted to a bare trustee and paragraph 3(3) of Schedule 16 applies. It is not a general rule for all bare trust acquisitions.

4. If it is a settlement, does a beneficiary have the required entitlement?

Paragraph 14 applies where the trustee is acting for a settlement under which a beneficiary is entitled to occupy for life or is entitled to the income from the dwelling. The source material does not suggest that every settlement qualifies.

5. Is the arrangement excluded because it is a unit trust scheme?

If the settlement is under a unit trust scheme, paragraph 14 does not apply. The source says unit trust schemes are dealt with separately.

6. Whose residence status should be tested?

If paragraph 13 or 14 applies, test the residence status of the beneficiary or beneficiaries, not the trustee, for the purpose of deciding whether the transaction is a non-resident transaction.

The source refers to the residence test in paragraph 4(1). It does not reproduce that test in full, so the detailed residence analysis must still be done under the separate residence rules.

7. Who remains responsible for SDLT compliance?

Even where the beneficiary’s residence status is used for the surcharge analysis, the trustee may still be the chargeable person and the person who must file the SDLT return. The source makes this point expressly for settlements, and in the leasehold bare trust case the trustee is treated as purchaser because of the special lease rule.

Example

Illustration: A trustee of an interest in possession trust buys a freehold dwelling. Under the trust terms, one beneficiary is entitled to all rental income from the property. The trustee is the legal purchaser and must deal with the SDLT return. But for deciding whether the non-resident surcharge applies, paragraph 14 requires you to look at the beneficiary’s residence status rather than the trustee’s.

Illustration: A bare trustee is granted a new lease of a dwelling. Because this is the grant of a lease, the trustee is treated as the purchaser for SDLT purposes under the special lease rule. However, if paragraph 13 applies, the surcharge question is decided by testing the beneficiary’s residence status, not the trustee’s.

Why this can be difficult in practice

The hardest part is often identifying the trust correctly.

A person may loosely refer to an arrangement as a “trust”, but that does not tell you whether it is a bare trust, a life interest trust, an interest in possession trust, or some other settlement. The SDLT result can change depending on that classification.

Another practical difficulty is that the source speaks of the residence status of the “beneficiary or beneficiaries”. Where there is more than one beneficiary, the detailed residence analysis may be more involved than in the single-beneficiary examples in the manual.

There is also room for confusion between substantive liability and filing responsibility. A reader may assume that if the beneficiary’s residence status is tested, the beneficiary must also be the person dealing with SDLT. That is not what the source says. In the settlement case, the trustee still files the return. In the bare trust lease case, the trustee is treated as purchaser for SDLT purposes, even though the surcharge test looks to the beneficiary.

Finally, these rules are specific. Paragraph 13 is tied to the grant of a lease to a bare trustee. Paragraph 14 is limited to certain settlements and excludes unit trust schemes. It is unsafe to assume that all trust purchases are looked through to beneficiaries for surcharge purposes.

Key takeaways

• In some trust cases, the non-resident SDLT surcharge is determined by the beneficiary’s residence status rather than the trustee’s.
• For a bare trust, this special rule applies here only where a new lease of a dwelling is granted to the bare trustee and the relevant lease provision applies.
• For a life interest or interest in possession settlement, the trustee may still be the chargeable person and file the SDLT return even though the beneficiary’s residence status is used for the surcharge test.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: SDLT Guidance: Non-Resident Transactions for Bare Trusts and Settlements Explained

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