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.
