Overview of Trusts and Settlements for Stamp Duty Land Tax

SDLT and Land Transactions Involving Settlements and Trusts

For SDLT, most trusts are treated as settlements unless they are bare trusts. Where trustees of a settlement buy land, the trustees are usually treated as the purchasers and are responsible for the SDLT return and any tax due. Payments made in exchange for trustees exercising a power so that someone acquires land can also count as consideration for SDLT.

• A settlement for SDLT means any trust arrangement that is not a bare trust.
• This includes interest in possession trusts, discretionary trusts, accumulation and maintenance trusts, mixed trusts, and some foreign trusts.
• If trustees of a settlement acquire land, the trustees in office at the effective date are normally the purchasers for SDLT purposes.
• Trustees are generally responsible for SDLT filing, payment, and related obligations, although someone appointed later is not liable for earlier penalties caused before they became a trustee.
• If money is paid for trustees to exercise a power of appointment or other discretion so that land is transferred, that payment is treated as consideration for the land transaction.
• In practice, the main issues are deciding whether the trust is truly bare or not, identifying the correct trustees at the relevant date, and checking whether any payment has been made for the transfer of land.

Scroll down for the full analysis.

How SDLT applies to settlements and trusts

This page explains how Stamp Duty Land Tax treats land transactions involving trusts that are settlements. The key point is that, for SDLT, most trusts are treated differently from bare trusts. If trustees buy land, the trustees are usually the purchasers for SDLT purposes, and the filing and payment obligations sit with them.

What this rule is about

SDLT needs to identify who is treated as buying or receiving land when property is held through a trust. That matters because SDLT is charged on land transactions, and someone must be responsible for the return, the tax, and any penalties.

The official material draws a basic distinction between:

• bare trusts, which are not treated as settlements for this purpose, and
• other trust arrangements, which are treated as settlements.

The page is concerned with the second category: settlements. In broad terms, if a trust is not a bare trust, SDLT usually treats it as a settlement.

What the official source says

The source says that a settlement for SDLT means any trust arrangement other than a bare trust.

It gives common examples of trusts that fall within this category:

• interest in possession trusts, where a beneficiary has a right to trust income as it arises
• discretionary trusts, where the trustees decide how income or capital is used among potential beneficiaries
• other non-bare trusts, including accumulation and maintenance trusts, mixed trusts, and trusts created under foreign law

Where trustees of a settlement acquire land, the trustees are treated as the purchasers for SDLT. The normal SDLT rules on notification and payment therefore apply to the responsible trustees.

The responsible trustees are:

• the persons who are trustees at the effective date of the transaction, and
• anyone who later becomes a trustee

But there is an important limit. A person who only becomes a trustee after the relevant time is not liable for a penalty, or interest on that penalty, if the penalty arose from something that happened before they became responsible.

The source also deals with powers of appointment and other discretions. If someone makes a payment in return for a power or discretion being exercised so that a land interest is acquired, that payment is treated as consideration for the acquisition of that land interest for SDLT purposes.

What this means in practice

If land is bought by trustees of a settlement, SDLT generally looks to the trustees, not the beneficiaries, as the purchasers. In practical terms, that means the trustees are the people expected to deal with the SDLT return and any tax due.

This matters because trusts often separate legal control from beneficial enjoyment. One person may receive income, another may ultimately receive capital, and trustees may have broad powers over who benefits. SDLT cuts through that complexity by fixing on the trustees as the relevant purchasers when the settlement acquires land.

The examples in the source show how wide the concept of settlement is for SDLT:

• In an interest in possession trust, the income beneficiary may be entitled to income, but that does not stop the arrangement being a settlement.
• In a discretionary trust, no beneficiary has an automatic right to capital or income, but it is still a settlement.
• Foreign trusts and mixed trusts can also fall within the SDLT settlement rules.

The point about powers of appointment is also important in practice. If trustees use a power so that land passes out of the trust to someone, and that person gives payment for the trustees to do so, SDLT treats that payment as consideration for acquiring the land. In other words, SDLT focuses on the substance of what has happened: money has been given in exchange for obtaining an interest in land.

How to analyse it

When looking at a trust-related SDLT issue of this kind, the main questions are:

• Is the arrangement a bare trust, or some other kind of trust?
• If it is not a bare trust, does it fall within the SDLT concept of a settlement? On the source material, the answer will usually be yes.
• Who were the trustees at the effective date of the transaction?
• Did anyone become a trustee later, and if so, when?
• Who is responsible for the SDLT filing and payment obligations?
• Has any payment been made in return for trustees exercising a power of appointment or other discretion so that land passes to someone?
• If so, is that payment properly treated as consideration for the land transaction?

A sensible practical approach is to identify the trust type first, then map the land transaction onto the trustee body in office at the effective date, and finally check whether any payment has been made for the exercise of a trustee power affecting ownership of land.

Example

A discretionary trust holds cash. The trustees use that cash to buy a property. For SDLT purposes, the trustees are treated as the purchasers. The fact that the trustees may later decide which beneficiaries can benefit from the trust does not change that starting point.

As a separate illustration, suppose trustees hold land and have a power to appoint it out of the trust. If a beneficiary pays money to the trustees in return for the trustees exercising that power so the land is transferred to that beneficiary, the payment is treated as consideration for the acquisition of the land interest.

Why this can be difficult in practice

The main difficulty is often classification. Trusts can be drafted in complex ways, and some arrangements are mixed or created under non-UK law. The source makes clear that many different non-bare trusts count as settlements, but working out whether an arrangement is truly bare or not can still be fact-sensitive.

Another practical difficulty is identifying the correct responsible trustees at the relevant time, especially where trustees retire or are appointed around the transaction date. Liability for penalties is not unlimited for later-appointed trustees, and the timing matters. The source draws a distinction between trustees who were already in office when the relevant act or omission occurred and those who became trustees only afterwards.

The point about payments for the exercise of powers can also be easy to miss. Not every trust distribution involves consideration, but where money is given in exchange for trustees exercising a power so that land passes, SDLT may treat that as consideration for the land acquisition. The legal form of the trust decision does not prevent SDLT from looking at the payment made for the result.

Key takeaways

• For SDLT, a settlement is any trust arrangement other than a bare trust.
• When trustees of a settlement acquire land, the trustees are generally treated as the purchasers and carry the SDLT obligations.
• If payment is made for trustees to exercise a power or discretion so that land passes to someone, that payment is treated as consideration for the land acquisition.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Overview of Trusts and Settlements for Stamp Duty Land Tax

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