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Deemed Ownership in SDLT: Lessons from the Angela Rayner Case

A Political Storm Over Property Tax

Deputy Prime Minister Angela Rayner has found herself at the centre of a tax controversy involving the underpayment of Stamp Duty Land Tax (SDLT).

The issue arose after she purchased a flat in Hove in May 2025, paying standard SDLT rates on the £800,000 transaction. However, it later emerged that she had previously transferred her share of the family home, which she purchased in April 2016 with her then-husband Mark, into a trust for their disabled son. Under complex deeming provisions in SDLT legislation, Rayner is treated as still owning that property for SDLT purposes, thereby triggering the 5% surcharge applied to second homes or additional properties.

Though the trust had been established by court order and she had said that she had relied on professional advice from “a conveyancer and two experts in trust law”, Rayner ultimately admitted under-paying stamp duty by £40,000, referred herself to the independent ethics adviser and began discussions with HMRC about settling the shortfall. It is worth adding that the conveyancing firm had since denied that they gave additional SDLT advice and relied on Rayner’s instructions to compute the SDLT due. Now, with confirmation that she breached the ministerial code and her resignation confirmed, her political career appears to be in tatters.

Her case illustrates how technical tax provisions can entrap even high-profile public figures and highlights the importance of understanding deemed ownership rules under Schedule 4ZA of the Finance Act 2003.

Deemed Interests Under Schedule 4ZA of the Finance Act 2003

The additional SDLT surcharge on second homes is governed by Schedule 4ZA of the Finance Act 2003. Under paragraph 8, individuals may be deemed to hold a “major interest” in residential property even when they do not hold legal title personally.

Specifically:

“A person is treated as having a major interest in a dwelling if it is held in trust for a child (under 18) of the person, or of the person’s spouse or civil partner.”

In practical terms, this means that if a parent places a property into a trust for their minor child, even if done by court order, they may still be treated as owning it when calculating SDLT on future purchases. This can inadvertently trigger the 5% surcharge for owning multiple properties.

This provision aims to prevent tax avoidance through indirect ownership structures. However, it also catches entirely legitimate trust arrangements, including those established for the care of vulnerable or disabled minors.

Trusts for Vulnerable People: No SDLT Exemption

There is a common misconception that trusts for disabled beneficiaries enjoy broad tax exemptions. While Capital Gains Tax and Inheritance Tax rules provide favourable treatment for vulnerable beneficiary trusts, SDLT does not follow suit. HMRC’s SDLT Manual makes it clear that:

• A parent is deemed to have an interest in property held in trust for their minor child, regardless of disability.
• This applies whether or not the parent is a trustee.
• Court-ordered trusts do not override the deeming rules.

The Rayner Example

Angela Rayner purchased a property in Hove in May 2025 and paid standard SDLT, having transferred her prior home into a trust for her disabled son. However, under paragraph 8, she was deemed to still have an interest in that first property, meaning the higher SDLT rate should have applied.

Although Rayner notes she had relied upon professional advice from “a conveyancer and two experts in trust law”, HMRC’s position is clear: deemed ownership applies regardless of intent or legal title, and ignorance of the rule is no defence.

The Risk of Inadvertent Non-Compliance

Rayner’s case is not unique. Many individuals overlook these deeming provisions, particularly when trusts are set up for personal or protective reasons rather than for tax planning.

Key risks include:

• Unwitting underpayment of SDLT when purchasing a new property.
• Exposure to interest and penalties from HMRC (up to 30% in careless cases).
• Reputational damage, particularly for individuals in public office or regulated professions.

Even more critically, individuals acting as trustees, whether appointed by court or voluntarily, have a legal duty to be aware of the nature and effect of the trust agreement. Trustees are expected to understand their legal obligations, the structure of the trust, and the property held within it. This fiduciary responsibility extends beyond the administration of the trust itself and includes awareness of any tax implications that may arise when the trustee acts in a personal capacity, such as when purchasing property. Where a trustee fails to disclose a trust interest that could affect SDLT treatment, they may be deemed negligent, even if acting in good faith.

This highlights a broader issue which is that conveyancers can only act on what they are told. A buyer who omits material information, such as a role in a trust that holds residential property, risks incorrect SDLT treatment and exposure to penalties, regardless of their interest.

Conclusion

The Angela Rayner case has brought public attention to a corner of tax law that can have substantial consequences. The SDLT deeming rules are not concerned with fairness or intent; they apply automatically and without exemption. Legal and tax professionals advising on family trusts, particularly involving minors or disabled beneficiaries, must have a working knowledge of these provisions, and importantly, trustees, especially as the buyer of a residential property, must be aware of the need to disclose any interest (direct or deemed) in other properties, including trust-held ones to their conveyancers.

As the Rayner case shows, the cost of oversight is not just financial, but reputational.

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The Winter Budget is Coming: Speculation, speculation and more speculation

With the Autumn (although arguably Winter) Budget confirmed for 26 November 2025 and with the Chancellor Rachel Reeves under ever-growing pressure to address a significant fiscal gap (estimated at around £20–£40 billion), speculation is growing unabatedly and somewhat exhaustingly! While Labour maintains its manifesto pledge not to raise income tax, VAT, or National Insurance on working people the Government appears (through ongoing media speculation) to have inheritance and property in its crosshairs to plug the shortfall. 

Potential changes on the horizon

So, given the constant fiscal newsfeed and the potential urgency, we have waded through the media speculation to present the key potential changes to look out for in the private client space:

Inheritance Tax (IHT)

In this Budget, we may see an announcement of a lifetime cap on tax free gifts, limiting the total amount that can be passed on exempt from IHT, even if the donor survives seven years. Possibly, instead of or in addition to this, we may see an extension of the so-called ‘seven-year rule’ to ten years, which would align conveniently with the latest IHT changes introduced on 6 April for Long-Term Residents.

Stamp Duty Land Tax (SDLT) Overhaul and Mansion Tax

Reports in various media outlets suggest a radical overhaul of SDLT, including:

• Replacing upfront SDLT with a proportional ‘national property tax’ on homes over £500,000; and
• Introducing a ‘mansion tax’ or wealth-based levy on high-value properties (possibly above £1.5 million or even £2 million).

How this applies to non-residents and owners of additional properties remains to be seen, but we would expect some form of surcharge to remain to dissuade overseas buyers from accumulating too much UK property.

Capital Gains Tax (CGT) on Primary Residences

This may shock many but the exemption on gains from selling primary residences could be removed for high-value properties, with speculation that this would apply to properties valued over £1.5 million with CGT kicking in at the excess of this.

National Insurance on Rental Income

The Government is considering subjecting private landlords’ rental income to NIC (potentially an 8% lev) affecting individual and partnership income.

What can be done?

Without wanting to dive into complex prose not turn this into an opinion piece, I will keep this punchy in the interests of time.

The key takeaways are as follows:

• Review assets in the next two months and establish (with the assistance of both lawyers and financial advisors) what assets can be gifted; and
• Consider any upcoming property transactions and establish whether to accelerate or delay pending the outcome of the Winter Budget and further clarity on SDLT reforms.

If you have any queries relating to Inheritance Tax and gifting, please contact Ben Rosen of Quastels LLP.

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Failure to Prevent Fraud: A Turning Point in Corporate Accountability

The new failure to prevent fraud offence (“FTPF”) under the Economic Crime and Transparency Act 2023 (“the Act”) is now in force (1 September 2025) for large organisations. It is vital that companies consider if they fall within the reach of the new offence.

With increasing public concern of rising economic crime and corporate malpractice, the UK government introduced a significant reform to corporate criminal liability. This new offence mirrors similar offences already in place for bribery (under the Bribery Act 2010) and tax evasion (under the Criminal Finances Act 2017).

Scope and Accountability

The offence applies to large organisations, defined as those meeting at least two of the following criteria:

• More than £36 million in turnover
• More than £18 million in total assets
• More than 250 employees

Section 199(13) of the Act says the offence applies to organisations incorporated or formed by any means which includes under the Companies Act 2006, The Limited Liability Partnerships Act 2000, Royal Charter, Statute (for example the NHS Trust). Current guidance suggests that the concept of “large organisations” is intentionally broad to cover the wider “group” of companies. Organisations does not mean bodies corporate, as such partnerships and Limited Partnerships fall within scope.

Most crucial is the extra-territorial reach of the Act. The offence applies to bodies incorporated and partnerships formed outside the UK but with a UK nexus. UK nexus means that:

• one of the acts that was part of the underlying fraud took place in the UK; or
• the gain or loss took place in the UK.

Whilst the intention from policy makers is that SMEs are not unduly burdened by the new FTPF offence, it should be noted that this is a policy priority. SMEs should remain abreast of regulations as:

(i) they could become within scope, either by virtue of existing legislation changing, or the company’s organic growth, and

(ii) Government guidance clearly indicated that irrespective of whether a company falls within scope, this should be considered industry best practice.

What Constitutes the Offence?

A company will be guilty of the offence if: (a) an “associated person” (e.g. an employee, agent, subsidiary) commits a fraud offence intending to benefit the organisation or another person to whom services are provided on behalf of the organisation, and (b) the organisation failed to prevent the fraud.

Importantly there does not need to be any actual benefit, merely the intention on behalf of the associated person to benefit.

“Associated Person” is interpreted broadly, including employees, agents, contractors, and even some subsidiaries. The intention is to ensure that companies are responsible for fraud committed by individuals who represent them in a relevant capacity.

If the organisation is found to have committed the offence, the sanction is an unlimited fine.

Fraud Offences Covered

The offence encompasses a wide range of economic crimes, including:

• Fraud by false representation (s.2 Fraud Act 2006)
• Fraud by abuse of position (s.4 Fraud Act 2006)
• Fraud by failing to disclose information (s.3 Fraud Act 2006)
• False accounting (s.17 Fraud Act 2006)
• Participating in a fraudulent business (s.9 Fraud Act 2006 and s.993 Companies Act 2006)
• Cheating the public revenue (The Theft Act 1968)

“Reasonable Procedures” Defence

The only defence available is that the organisation had “reasonable procedures” in place to prevent fraud. This is akin to the “adequate procedures” defence under the Bribery Act.

The Government has released some guidance for reasonable fraud prevention procedures and include:

• Top level commitment – responsibility for prevention of fraud should be placed at senior governance level so directors, partners, senior management to ensure a clear governance framework across the entire organisation.
• Risk assessments – these are dynamic procedures and as such they should be regularly documented and reviewed.
• Proportionate risk-based fraud prevention procedures – aim should be to reduce opportunities for fraud which may arise within the companies operating structures.
• Due diligence – appropriate checks in place such as external identity verification, dual approval process on certain transactions.
• Communication – procedures and policies should be effectively communicated through the company through active training.
• Monitoring and review – ongoing monitoring should be in place which actively detects incidents of fraud.

The Government has made it clear that many companies will have adequate procedures in place and that it is not necessary to duplicate work, however simply relying on pre-existing procedures will not mean those procedures are adequate unless they have been reviewed.

Why This Matters

The new offence is significant for several reasons:

• Increased Accountability: Companies can no longer shield themselves behind complex structures or claim ignorance of employee’s actions.
• Shift in Compliance Culture: Like the Bribery Act before it, the Failure to Prevent Fraud offence is expected to drive cultural change, embedding anti-fraud measures into corporate governance.
• Enforcement Pressure: Whilst previous criticised for failing to pursue corporate crime, agencies such as the Serious Fraud Office (SFO) and Crown Prosecution Service (CPS) will be more likely investigate suspicious or concerning activity.

What Should Companies Do Now?

Companies should act now to ensure compliance. Directors, Partners and Senior Managers should understand where and how your organisation might be vulnerable to fraud. Ensure internal procedures are up to date and robust enough to detect and prevent fraudulent activity.

Government guidance has made it clear that it is not sufficient to rely on the procedures that already exist as a defence, if these procedures are not adequate. As such checking existing procedures should be the first priority. This may require external advisors to benchmark and update your policies.

The new offence sends a clear message: preventing fraud is not optional. Companies must take responsibility for the actions of those who represent them and put in place robust, reasonable procedures to stop economic crime in its tracks. In doing so, they not only comply with the law but also strengthen their ethical foundation.

If you require any assistance with reviewing and updating your procedures to ensure compliance, please contact Max Sherrard (msherrard@quastels.com).

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