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Understanding SDLT Pitfalls: Lessons from the Angela Rayner Case

The recent revelation involving the former Deputy Prime Minister Angela Rayner’s underpayment of stamp duty underscores how easily mistakes can arise when trusts or family property arrangements are involved. This provides an important reminder that SDLT rules are highly technical, and unintended consequences can be costly.

The Issue: Deemed Ownership Rules

HMRC guidance (SDLT Manual SDLT09815) makes clear that certain property interests are treated as if you own them, even if you have transferred legal ownership or placed the property into trust.

Key examples include:

  • Bare trusts: Where the beneficiary has absolute rights, HMRC will still treat them as the owner for SDLT purposes.
  • Trusts with occupation or income rights: If you retain a right to live in the property or benefit from rental income, you may still be deemed to own it.
  • Property held for children: Even where a property is held on trust for a child, the rules may still attribute ownership to a parent or guardian.

This means that even if you believe you no longer own a property, HMRC may still count it when assessing whether a new purchase is liable for the higher rates of SDLT (the 5% surcharge on additional dwellings).

Why This Matters

If you purchase a new property while still deemed to own another, the SDLT bill can be substantially higher. For example, on an £800,000 purchase:

  • Standard SDLT: approx. £30,000
  • SDLT with higher rates applied: approx. £70,000

For many, the difference is significant and can come as an unwelcome surprise if the rules are misunderstood.

What This Means

We know that clients regularly assume that divesting legal title or using trust structures will shield them from tax liabilities. The Rayner case illustrates how dangerous that presumption can be.

To avoid unexpected liabilities, we recommend that you seek appropriate and specialised tax advice. Conveyancers will calculate SDLT, but where trusts, family transfers, or multiple properties are involved, additional tax advice is essential.

Final Thoughts

The Rayner episode is a stark reminder that tax regulations not only reside in the headlines – these can shape outcomes and reputations. The gifting of property within families or setting up trusts, though often done with the best of intentions, can carry unintended tax consequences.

Financial planning for the family, trusts, and property ownership are often linked, but, from a tax perspective, the outcomes can be more complex than expected. Before completing any transaction:

  • Take advice that looks at the bigger picture. Not just the legal title, but also beneficial ownership and future intentions.
  • Consider SDLT in context with other taxes such as Capital Gains Tax and Inheritance Tax, as these are often connected.

How can we help?

At Simmons Gainsford, we can review your property and trust arrangements to ensure SDLT is calculated correctly and considered in the context of any other tax liabilities that may be relevant.

Please get in touch if you require assistance or advice.