A bare trust is a trust in which property is held by a person as trustee for:
- a person who is ‘absolutely entitled’ against the bare trustee, or who would be so entitled but for being a minor or having some other legal disability;
- two or more persons who are or would be jointly so entitled; or
- a person who has nominated a bare trustee to act for them for reasons including anonymity.
A worked example of a bare trust is provided separately on our website under LBTT Worked Examples.
A person is ‘absolutely entitled’ against the bare trustee if they have the right against the trustee to acquire the trust property from the trustee, and if the beneficiary has the right to direct how the trust property is to be dealt with. No consent of the trustee is required for the beneficiary to acquire the trust property.
Acquisition of a chargeable interest by a bare trustee
Where a party acquires a chargeable interest or an interest in a partnership as a bare trustee, LBTT applies as if the chargeable interest was acquired by the beneficiaries of the trust. Therefore anything that the bare trustee does in relation to the chargeable interest is regarded for the purposes of LBTT, as an action by the beneficiaries. Any LBTT due may be recovered from the bare trustee. Different rules apply in relation to leases, as follows.
Grant of a lease to bare trustee
Where a lease is granted to a person acting as a bare trustee, the bare trustee is treated as the buyer of the whole interest acquired and so will be liable to make LBTT payments and returns in respect of the lease.
Grant of a lease by bare trustee
Where a person acting as a bare trustee grants a lease, the person is treated as the seller of the whole interest disposed of.
Direction from the beneficiary in a bare trust to transfer their interest to another party as beneficiary
The transfer from a beneficiary to another person, whether already a beneficiary or otherwise as a beneficiary, is the transfer of a chargeable interest for LBTT purposes.
Direction from the beneficiary in a bare trust to bare trustee to dispose of the trust property
The transfer of a chargeable interest from the bare trust to a third party on the open market is treated as a land transaction for LBTT purposes.