Understanding LBTT and ADS Rules for Property Purchases Involving Trusts

LBTT ADS and trust purchases: when the beneficiary is treated as the buyer

For Scottish LBTT, a property bought through a trust is not always treated as bought by the trustees. For ADS, the key issue is who the law treats as the buyer. In a bare trust, the beneficiary is usually treated as the buyer. In some settlement trusts, a beneficiary is also treated as the buyer if they have a qualifying right in the property. If neither applies, the trustees are treated like a non-individual buyer and ADS will normally apply automatically.

• A bare trust, including many nominee arrangements, is usually treated as a purchase by the beneficiary if they are absolutely entitled to the property, even if legal title is in the trustee’s name.
• For other trusts, a beneficiary is treated as the buyer only if they have a relevant interest, such as a right to occupy the dwelling for life or a right to income from it.
• If trustees buy for a non-bare trust and no beneficiary has a relevant interest, the purchase is treated like one by a non-individual, so ADS applies automatically.
• When a beneficiary is treated as the buyer, ADS is worked out by looking at that beneficiary’s property ownership position at the effective date, not the trustees’ position.
• In that case, dwellings owned by the beneficiary’s spouse, civil partner, cohabitant or child under 16 may also need to be counted.
• The trust deed and the legal rights it creates are crucial; registered title or family intentions alone do not decide the ADS outcome.

Scroll down for the full analysis.

LBTT Additional Dwelling Supplement and trusts: when a trust purchase is treated as the beneficiary’s purchase

This page explains how the Additional Dwelling Supplement (ADS) works when a dwelling is bought through a trust for Scottish Land and Buildings Transaction Tax purposes. The key point is that trust purchases are not all treated the same. In some cases the trustee is effectively treated like a non-individual buyer, so ADS applies automatically. In other cases, the beneficiary is treated as the buyer instead, and you look at that beneficiary’s property position.

What this rule is about

LBTT has special rules for purchases involving trusts because legal ownership and beneficial ownership may sit in different hands. A trustee may take title to the property, but that does not always tell you who is treated as the buyer for ADS.

The official material draws an important distinction between:

• bare trusts, where the beneficiary is effectively the real owner, and
• other trusts, including settlements, where the answer depends on whether a beneficiary has a relevant interest in the dwelling.

This matters because ADS is charged by looking at who is treated as buying and what dwellings that person is taken to own at the end of the effective date of the transaction.

What the official source says

The official guidance says that where trustees buy a dwelling for a trust that is not a bare trust, and the beneficiaries have no relevant interest, ADS always applies. In that situation, the purchase is treated in the same way as a purchase by a non-individual.

For bare trusts, the position is different. The beneficiary is treated as the buyer for LBTT purposes when trustees buy a dwelling on behalf of the trust. That is so whether or not the trustee is the person shown on the Land Register title.

A bare trust includes a case where property is held for a person who is absolutely entitled as against the trustee, including someone who would be absolutely entitled but for legal disability such as being under age, and it also includes nominee arrangements.

The guidance explains that a person is absolutely entitled if they have the exclusive right to the property, subject only to limited trustee rights such as recovering duty, tax, costs or other outgoings from the property, or otherwise directing how the property is dealt with.

For other trusts, where the buyer is the trustee of a settlement and a beneficiary has a relevant interest in a dwelling forming part of the trust property, that beneficiary is treated as the buyer. A relevant interest exists where, under the terms of the settlement, the beneficiary is entitled either:

• to occupy the dwelling for life, or
• to income from the dwelling, whether gross or net.

Again, this treatment applies whether or not the trustees are the registered owners in the Land Register.

The guidance also says that when the beneficiary is treated as the buyer under a bare trust or settlement trust, dwellings owned by that beneficiary’s spouse, civil partner, cohabitant, or child under 16 may also count in working out how many dwellings the buyer is treated as owning.

What this means in practice

The practical question is not simply “who is named on the purchase deed?” It is “who does LBTT treat as the buyer for ADS?”

There are three broad outcomes in the source material.

• If trustees buy for a trust that is not a bare trust, and no beneficiary has a relevant interest, ADS applies automatically.
• If trustees buy under a bare trust, the beneficiary is treated as the buyer, so you test ADS by reference to the beneficiary’s position.
• If trustees buy under a settlement and a beneficiary has a relevant interest in the dwelling, that beneficiary is treated as the buyer, so again you test ADS by reference to the beneficiary’s position.

This can produce very different results. A trust purchase can be charged to ADS even if the trustees themselves own no other dwellings. Equally, a trust purchase may escape ADS if the beneficiary treated as buyer would own only one dwelling at the end of the effective date.

The guidance’s examples show both outcomes. In a discretionary settlement with no beneficiary who can occupy the property or require income from it, ADS applies to the trustees’ purchase. By contrast, where a dwelling is bought through a trust for an adult with incapacity using that person’s funds, and the trust structure means that person is treated as the owner, ADS does not apply if that person is treated as owning only that one dwelling.

How to analyse it

A sensible way to analyse a trust purchase for ADS is to work through these questions in order.

• What type of trust is involved: a bare trust, a nominee arrangement, or some other settlement?
• If it is a bare trust, is the beneficiary absolutely entitled, or would they be but for legal disability?
• If it is not a bare trust, does any beneficiary have a relevant interest in the dwelling under the trust terms?
• If there is a relevant interest, is the beneficiary entitled to occupy the dwelling for life or entitled to income from it?
• Once the treated buyer is identified, how many dwellings is that person treated as owning at the end of the effective date?
• Do the ownership rules for a spouse, civil partner, cohabitant, or child under 16 also need to be taken into account because the beneficiary is treated as the buyer?

In practice, the trust deed or settlement terms are central. The answer depends on the legal rights created by the trust, not simply on what the family intends or how the property will actually be used.

Example

Illustration: trustees of a discretionary trust buy a flat. The trust has several possible beneficiaries, but none has a right to live in the flat for life and none is entitled to the rental income from it. On the official guidance, no beneficiary has a relevant interest. The trustees’ purchase is therefore treated like a purchase by a non-individual, and ADS applies.

Now change the facts. Suppose the trust is a bare trust and the trustees hold the flat as nominee for one beneficiary who is absolutely entitled to it. In that case, the beneficiary is treated as the buyer. You would then ask whether that beneficiary, taking account of the wider ownership rules that apply to them, is treated as owning more than one dwelling at the end of the effective date.

Why this can be difficult in practice

The difficult part is often identifying whether a beneficiary has the kind of interest that matters for ADS. Not every possible benefit under a trust is enough.

The source material makes clear that a mere possibility of future benefit under a discretionary settlement does not by itself amount to a relevant interest in a dwelling. What matters is whether the trust terms give the beneficiary a specific qualifying right, such as a life right to occupy or an entitlement to income from the dwelling.

Another difficulty is that legal title can be misleading. A trustee may appear on the register, but that does not settle the LBTT analysis. The legislation and guidance can instead deem the beneficiary to be the buyer or owner.

There can also be practical complexity where the beneficiary is a minor, a person under disability, or an adult with incapacity. The guidance indicates that legal disability does not prevent bare trust treatment where the person would otherwise be absolutely entitled. That is why the adult with incapacity example can still result in the beneficiary being treated as the owner for ADS purposes.

Key takeaways

• A trust purchase is not analysed solely by looking at the trustees or the registered title; the main question is who LBTT treats as the buyer.
• For bare trusts, and for some settlement trusts where a beneficiary has a relevant interest, the beneficiary is treated as the buyer for ADS.
• If trustees buy for a non-bare trust and no beneficiary has a relevant interest, ADS applies automatically in line with the treatment of non-individual buyers.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding LBTT and ADS Rules for Property Purchases Involving Trusts

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