Stamp duty where a trust power is used after a payment
Payments linked to trust powers
A special SDLT rule can treat a payment as consideration where someone receives land through a trust power or discretion.
- The payment’s purpose is central.
- HMRC says the rule targets unusual arrangements.
- The trust deed and payment evidence matter.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty where a trust power is used after a payment
A transfer from a trust is not usually a sale. But stamp duty can still matter if someone pays to become eligible under a trust power and then receives an interest in land. This is a narrow rule. Why the payment was made is the key point.
What this rule is about
Some trusts let trustees choose who may benefit. A power of appointment lets a named person make that choice. A trustees’ discretion lets the trustees decide.
Where a property interest comes through either route after a connected payment has brought someone within those who may benefit, Finance Act 2003 sets out a special rule. That rule can include a linked payment in what was paid for the interest.
What the official source says
HMRC’s internal manual describes an unusual case in which someone pays trustees, or somebody else, so that a power or discretion will be used in that person’s favour. It excludes normal trust dealings.
That manual is HMRC guidance, not the law. More specific words appear in the legislation. Under those words, a payment given to make someone an object of the power or discretion counts as consideration.
- To fall within the rule, a person must receive an interest in land.
- They must receive it through a power of appointment or trustees’ discretion.
- Someone must make a payment connected with the recipient becoming eligible under that power or discretion, rather than merely with a later trust decision.
- Under the rule, that payment counts as consideration for the interest received.
What this means in practice
You might think a trust transfer cannot involve stamp duty because no ordinary sale took place. That is not always safe. A payment outside the transfer document may still matter.
Do not stop at who received the money. Ask what the money bought.
- A payment to trustees may be relevant.
- A payment to another person may also be relevant.
- Record the amount and purpose of the payment clearly.
- A routine trust decision is not automatically caught merely because someone later benefits.
How to analyse it
Start with the paperwork, not the label people give the arrangement. Calling a sum a gift, contribution or fee does not settle its purpose.
- Identify the land interest that came from the trust.
- Read the trust deed to find the relevant power or discretion.
- Check whether the recipient was already within the people who could benefit.
- Trace every payment made before or alongside the decision.
- Ask whether the payment was for that person to become eligible.
- Then consider the wider SDLT position using the amount treated as consideration.
Example
Noor pays £10,000 to qualify. Under an agreement, she joins the class of people who trustees may benefit. Later, the trustees use their discretion to give her an interest in trust land. Paragraph 7 can treat the £10,000 as consideration for that interest. You cannot work out the tax result from this rule alone, but you must not simply ignore the payment.
Why this can be difficult in practice
This is the part people get wrong: payment for becoming eligible is not necessarily the same thing as payment for the trustees’ later decision. The wording of the agreement and the sequence of events may decide the answer.
- HMRC’s summary and the precise statutory wording are not identical.
- A payment may have more than one stated purpose.
- The recipient may already have been eligible under the trust deed.
- Informal family arrangements may have little written evidence.
Key takeaways
- A trust transfer can involve a payment that matters for stamp duty.
- Check why the payment was made, not just where it went.
- HMRC’s manual is useful guidance, but the legislation is the law.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- FA 2003 section 105 — applies the SDLT rules to trustees and trusts
- FA 2003 Schedule 16 para 7 — treats certain trust-power payments as consideration
Official guidance
The pages below are HMRC’s guidance. Guidance is not law. It sets out how HMRC reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. HMRC can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- The statute refers to payment for a person becoming an object of the power or discretion. HMRC’s description focuses instead on a payment to have the power used in that person’s favour. Those descriptions are not identical, so the purpose and terms of any payment need close review.
- The supplied legislation is recorded as current only to 17 November 2025. Its current form should be checked for a transaction after that date.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- the trust deed and the exact power or discretion
- the deed or record by which the interest in land was given
- any agreement, correspondence or minutes about the payment
- proof of who made the payment, who received it and why
- the date of the transaction
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching UK Stamp Duty Land Tax (SDLT), which applies in England and Northern Ireland. MY QUESTION Stamp duty where a trust power is used after a payment [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - FA 2003 section 105 - applies the SDLT rules to trustees and trusts https://www.legislation.gov.uk/ukpga/2003/14/section/105/2025-11-17 - FA 2003 Schedule 16 para 7 - treats certain trust-power payments as consideration https://www.legislation.gov.uk/ukpga/2003/14/schedule/16/paragraph/7/2025-11-17 HMRC's guidance page on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm31760 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. HMRC guidance is HMRC's view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - The statute refers to payment for a person becoming an object of the power or discretion. HMRC's description focuses instead on a payment to have the power used in that person's favour. Those descriptions are not identical, so the purpose and terms of any payment need close review. - The supplied legislation is recorded as current only to 17 November 2025. Its current form should be checked for a transaction after that date. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show Finance Act 2003 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 1 September 2026
Useful article? You may find it helpful to read the original guidance here: Stamp duty where a trust power is used after a payment
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