Can higher rate SDLT apply when a bare trust buys a property for a child?

Introduction

People often search for this issue when a property has been bought through a trust and the Stamp Duty Land Tax (SDLT) bill looks far too high. The confusion usually arises because the legal owner shown at HM Land Registry is not always the person treated as the purchaser for SDLT purposes.

A common example is where a parent sets up a bare trust for a child, trust funds are used to buy a dwelling, and the conveyancer files the SDLT return on the basis that the higher rates for additional dwellings apply. In some cases that is wrong. The SDLT treatment depends on who is treated as the purchaser under the Finance Act 2003, not simply on who signed documents or who appears on the title register.

The Question

A parent sold a former family home and, under family arrangements, intended to provide equivalent value for a younger child by settling funds into a bare trust. The plan was for the trust to acquire a suitable property for that child.

Before the intended transfer of one property into the trust could be completed, another property became available at auction and had to complete quickly. To meet the auction deadline, trust funds were used to buy that second property. The property was therefore acquired in the name of the bare trust for the child.

SDLT of £8,140 was paid on a purchase price of £258,000. The parent had expected SDLT of about £400 and was told the higher amount could later be reclaimed. The child was a minor and had never previously owned a dwelling. There were also later discussions about swapping two properties of similar value, but that later transfer had not yet been completed.

The main question is whether the higher rates were wrongly charged on the trust purchase, and whether a refund can be claimed.

Nick’s Explanation

Nick’s central view was that the SDLT analysis turns on the bare trust rules. In anonymised form, his reasoning was:

“For SDLT, a bare trust is treated transparently, so the beneficiary is regarded as the purchaser. If the child did not already own another dwelling at that time, the higher rates for additional dwellings should not have applied.”

He also noted that on a £258,000 residential purchase, the standard SDLT at the time would have been £400, whereas £8,140 had been paid. On that basis, the likely overpayment was £7,740, plus repayment interest if HMRC accepts the claim.

Nick further explained that delays at HM Land Registry do not decide the SDLT outcome. The key date for SDLT is the effective date of the land transaction, usually completion. He also identified a separate point: if the parties later exchange properties, that later exchange may itself create SDLT consequences and must be analysed as a separate transaction.

The Law

The main provisions are in the Finance Act 2003.

Section 43 FA 2003 deals with purchasers acting as nominees or under bare trusts. In broad terms, where a person acquires property as nominee for another, or as trustee of a bare trust, the beneficiary is treated as the purchaser for SDLT purposes.

That matters because the higher rates for additional dwellings in Schedule 4ZA FA 2003 are tested by looking at the position of the purchaser. If the beneficiary under the bare trust is the purchaser, it is the beneficiary’s property ownership position that matters, not the trustee’s separate personal position.

Section 47 FA 2003 is relevant if properties are later exchanged. It treats an exchange as involving two separate land transactions. Each side is taxed by reference to the market value of the property acquired, even if no cash changes hands.

For refund timing, SDLT amendment and repayment claims are subject to statutory time limits. Where a return has been filed incorrectly, the practical route and exact procedure depend on the circumstances, but the ordinary four-year limit from the effective date is often critical in overpayment cases of this kind.

If any argument had been raised that the first property was not suitable for use as a dwelling, readers should note that the threshold for “unsuitable for use” is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Mere disrepair, neglect, lack of mortgageability or the need for renovation will not necessarily be enough.

Analysis

Step 1: identify the purchaser for SDLT.

If the property was bought using funds held under a bare trust for a child, and the trust was genuinely a bare trust, section 43 FA 2003 generally treats the child beneficiary as the purchaser. That is the starting point.

Step 2: test whether the higher rates in Schedule 4ZA applied.

The higher rates are aimed at purchases of additional dwellings. If the child beneficiary was the purchaser and the child had never owned another dwelling, the additional dwelling surcharge should usually not apply on that purchase.

Step 3: compare the SDLT actually paid with the SDLT that should have been paid.

On the figures provided, the purchase price was £258,000 and the SDLT paid was £8,140. Nick calculated that the standard residential SDLT at the time should have been £400. That leaves a likely overpayment of £7,740.

Step 4: ignore Land Registry delay when deciding the SDLT position on the completed purchase.

It is easy to assume that because registration is delayed, the SDLT position is somehow provisional. That is not right. SDLT is charged by reference to the effective date of the land transaction, usually completion, not by reference to when HM Land Registry later updates the title.

Step 5: keep the later property swap separate.

The later proposed or partly implemented swap should not be confused with the SDLT already paid on the original trust purchase. If there is an exchange of properties, section 47 FA 2003 can create fresh SDLT charges on both sides, based on market value at the effective date of that exchange. That later issue may reduce the net benefit of any refund, but it does not by itself justify overcharging SDLT on the earlier purchase.

Step 6: do not rely on personal ownership outside the trust if the trust is transparent.

The parent in this scenario stressed that they had not owned both properties at the same time except in a trustee capacity. That point may be consistent with the overall analysis, but the stronger legal point is the bare trust transparency rule. If the child is treated as purchaser, the child’s ownership history is what matters for the higher rates test.

Outcome

On the facts given, the stronger view is that the higher rates for additional dwellings should not have applied to the £258,000 purchase made through the bare trust for the child.

That means the SDLT paid appears to have been too high. If the standard residential SDLT due was £400, the likely overpayment is £7,740, with potential repayment interest from HMRC.

However, any later exchange or transfer of the two properties needs its own SDLT review. That later transaction may itself create a separate SDLT charge, especially because exchanges are taxed by market value under section 47 FA 2003.

Practical Steps

If you are in a similar position, the sensible next steps are:

• Obtain the SDLT return and SDLT5 certificate for the trust purchase.
• Check the trust deed to confirm that the arrangement was in fact a bare trust.
• Confirm who the beneficiary was on the completion date and whether that beneficiary owned any other dwellings at that time.
• Check the completion date carefully, because SDLT is tested by reference to that date, not registration.
• Compare the SDLT paid with the SDLT that should have been paid at the rates in force on that date.
• Consider the statutory time limit for amending or reclaiming overpaid SDLT. In this scenario, the four-year period from completion was identified as important.
• Review any later TR1 transfer, exchange, or “swap” separately. Do not assume it is tax-free just because it was intended to correct an earlier conveyancing problem.
• If anyone suggests a property was not a dwelling because it was in poor condition, test that carefully against current case law, especially Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Conclusion

Where a dwelling is bought through a bare trust for a child, SDLT usually looks through the trust and treats the child as the purchaser. If that child did not already own another dwelling, the higher rates for additional dwellings should generally not apply. In the scenario discussed here, that points to a likely SDLT overpayment on the trust purchase, although any later exchange of properties may create a separate SDLT issue that must be analysed on its own facts.

Legal References Used

• Finance Act 2003, section 43
• Finance Act 2003, section 47
• Finance Act 2003, Schedule 4ZA
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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