Grant of long lease on property held in Trust

Freehold held by one trustee wishes to grant leaseholds to the other trustee for no consideration

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Good morning,

Struggling with this slightly so any help would be greatly appreciated.

Trustee A owns the legal freehold of a property, which consist of two flats let to tenants on short terms leases. For commercial reasons (presumably to make the properties more saleable and easier to remortgage) the trustees have been advised that long leaseholds should be created for both flats.

The proposal by the solicitor is that these leaseholds would be granted to trustee B as a freeholder cannot issue a leasehold to themselves. Trustee A and B are Father and daughter.

There is a £400,000 mortgage on the freehold.

Removing the trust element of my query, this arrangement would be caught by the connected person rules for CGT, and SDLT would be due on the financial obligation taken on by Trustee B.

This is purely being done for commercial reasons and the trust's ultimate beneficaries are trustee B and her children. 

Is there anyway that we can argue that there has been no change in beneficial ownership for CGT purposes? Or could we argue this comes under the exchange of joint interestes for CGT and SDLT purposes? Or something else I have missed!?

Any help would be greatly appreciated.

TIA

Liam

Replies (5)

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By Paul Crowley
20th Sep 2022 12:35

Had a very similar question from client, supposedly second hand from the loan arranger and a solicitor
Seems I was last in line.
He wanted the properties to be transferred to a company, which could then grant leases and separate out titles for land registry.
My final thoughts were than the beneficial ownership has not changed and that the company is just a nominee title holder, just like in the olden times when every company was obligated to have at least two shareholders and often the bank manager was a nominee holder of one single share, but dividends went to the beneficial holder

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By Justin Bryant
20th Sep 2022 13:06

An SDLT exchange is probably the last thing you want here (it's not a relief) and it does not look like there is one if nothing is coming back to the vendor (c.f. a sale & leaseback - which can result in deemed MV SDLT under the potentially nasty SDLT exchange rules if not done properly).

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By Liam.em
20th Sep 2022 13:38

Thanks all.

I've just discovered HMRC's SDLT manual 31745 https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdlt... states that Trustees are treated as one body for SDLT purposes.

This would seem to imply that there is no land transaction where the transfer is made between the trustees.

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Replying to Liam.em:
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By Justin Bryant
20th Sep 2022 13:52

Only if they are trustees of the same trust - which is not clear in your OP.

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Replying to Justin Bryant:
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By Liam.em
20th Sep 2022 14:11

Apologies. Yes they are both trustees of the same trust.

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