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.
LBTT(S)A 2013 schedule 18 paragraph 19
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.
LBTT(S)A 2013 schedule 18 paragraph 20
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.
LBTT(S)A 2013 schedule 18 paragraphs 5-7
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.
LBTT(S)A 2013 schedule 18 paragraph 8
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.
LBTT(S)A 2013 schedule 18 paragraph 9
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.
LBTT(S)A 2013 schedule 18 Part 3
Worked Example
Red, holds a house in trust for Blue, who is the beneficiary. The house is rented out.
Blue receives all the rent as income. Red cannot do anything with the house unless instructed to do so by Blue
Red is the registered proprietor of the house on the Land Register of Scotland.
Blue as beneficiary, is liable for LBTT.
If Blue, transfers their rights as beneficiary to Green, then Green, has acquired the chargeable interest and will be liable for LBTT on the acquisition if there is any consideration.
Ref ID
LBTT8002
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