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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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A Simple Guide to Property Ownership Options When Buying With Your Partner or a Friend

What are Joint Tenants?

Holding the property as joint tenants means that each person has an equal interest in the property. If one of you died, the survivor would automatically own the whole (100%) of the property.

What are Tenants in Common (equal shares)?

Holding the property as tenants in common, in equal shares, mean that you each own 50% of the property. If one of you died, your 50% share of the property would be left to whomever you choose under your Will. You may wish to consider this option if you are both contributing equally to purchasing your property but wish to decide who your 50% share is left to.

What are Tenants in Common (unequal shares)?

Holding the property as tenants in common, in unequal shares, means that you hold the property in anything other than 50/50 shares. It could be 60/40, 80/20 or even 99/1. You may wish to consider this option if you are contributing different amounts to purchase your property. Should you decide to hold your property as tenants in common with unequal shares, you should consider making a Declaration of Trust providing for more detail as to options on disposing of your share and contributions to property expenses.

Does This Affect Our Mortgage?

No, it does not matter how you hold your property when it comes to your mortgage. You are both jointly and individually responsible, meaning that you are not just liable for ‘your half’ of the mortgage.

Can We Change Our Minds Once the Property is Registered?

Joint Tenants to Tenants in Common: this is done by way of severance of joint tenancy. You can do this by yourself, or by appointing a Solicitor.

Tenants in Common to Joint Tenants: to do this, you both need to agree to the change. The documentation is more complicated. You should appoint a Solicitor to assist with this.

What is a Declaration of Trust?

In simple terms, it is a legally binding document that sets out the underlying ownership between the property owners. It can be drafted to suit your required needs, but it will mainly outline how much of the property you each own, the amount each person has contributed to the purchase, and the procedures for selling or transferring ownership. The existence of the Trust will need to be registered with HMRC and the Land Registry. To find out more, please contact our Private Wealth & Tax team who can assist.

If you have any queries about the contents of this article, please contact our Residential Real Estate team via the form below.

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Your Home, Your Risk: Why Legal Contracts Matter on Renovations

What value do you place on your home?

Your home is one of the largest investments you will make. In almost all cases, it is your most important asset not just because of its capital value, but because it’s your home and hopefully a sanctuary. Yet so many of us neglect its importance when arranging for works to be undertaken to it.

It is exciting to be improving or extending your home. However, without proper planning and legal safeguards, home improvement projects very often spiral into dispute, financial loss, and even damage to your most valuable asset.

How can you protect yourself?

1. Contractor selection – Select your contractors and professionals very carefully.
2. Defined works – Be very clear about what is and what is not included.
3. Insurance – Make sure the contractor is adequately insured.
4. Contract – Have the contractors and advisers enter into a formal contract.

Selecting a Contractor

Just a few of the many considerations include:

• Where possible, obtaining a personal recommendation, and attending previous jobs and speak to the contractor’s client;
• Checking the contractor’s financial solvency; and
• Ensuring the contractor is adequately insured.

Defining the Works

Make sure that all the works you are instructing to be carried out are clearly defined, and that you specify to what standard these must be completed.

Insuring the Works

Even on small jobs, things can do drastically wrong – a nail through the wrong wall could mean a pipe bursting and flooding your home and any adjoining properties, or faulty wiring could result in fire damage to your property and contents. Standard home insurance will not cover any ongoing works, and you should ensure that your contractor (a) is adequately insured to cover these risks and (b) takes responsibility for such damage by means of a formal contract.

A Formal Contract

The best step you can take to protect yourself is put a proper building contract in place at the outset. A well-drafted contract does more than just describe the works to be carried out – it manages your risk, defines responsibilities, and provides legal recourse if something goes wrong.

Many homeowners assume that standard or unamended forms of agreement offer sufficient protection. In reality, these agreements are inherently contractor-friendly and leave homeowners exposed.

Why do you need a contract?

Without appropriate contractual protection, you may be exposed to serious risks which can affect your ability to live in, sell, or borrow against your home. For example:

1. Defective works

Statutory construction obligations are unlikely to protect you from the full extent of any damage and financial losses you might suffer as a result of poor workmanship. And even where they do, contractors routinely seek to limit your ability to recover losses by inserting onerous limitation clauses into construction forms. Even where you believe you are “covered,” you may find you cannot recoup your losses in practice.

2. Legal and Regulatory Consequences

If works are completed without the necessary approvals or certificates (e.g. building control sign-off or listed building consent), you may be in breach of legal obligations or planning conditions. Standard forms of contract tend to place the burden of complying with these on you, rather than on the contractor. This can cause problems years down the line. Solicitors acting for prospective buyers will raise enquiries about the works, and any gaps in paperwork will come to light.

3. Impact on Property Value and Mortgageability

Failure to complete your project in compliance with your mortgage terms could reduce a valuation of your home – or worse, lose you your mortgage. Mortgage lenders can refuse to lend against properties with unresolved building issues or works which have not been signed off. If you need to refinance or a buyer needs a mortgage, the transaction could fall through.

4. Inadequate Insurance and Uninsured Works

Standard, unamended building contracts often contain minimal insurance provisions, offering little or no protection against professional negligence, leaving you exposed if things go wrong. The risks of professional negligence are real and potentially devastating, as seen in tragic cases like Grenfell Tower.

Your home insurance should be carefully considered to establish if it covers the works, but worse, could also be in jeopardy. Many homeowners are also unaware that their standard buildings insurance policy will almost certainly not cover construction works, and that these need to be insured separately. Failure to notify your insurers or ensure the works are completed in accordance with their requirements could also invalidate your cover.

Your contract, if well drafted, can provide critical protection, allowing you to recover losses arising from negligent or defective works for up to 12 years after completion.

5. Breaching your Leasehold Terms

Leaseholders face heightened risk, as they must comply not only with general legal obligations but also with general legal obligations but also with the specific terms of their lease. Unauthorised works can amount to a breach, exposing the leaseholder to enforcement action or even forfeiture.

Even when works are authorised, problems can arise if the building contract doesn’t require the contractor to comply with the terms of the lease or any licence for alterations. Breach of those terms, however inadvertent, remains the leaseholder’s responsibility. Crucially, you are unlikely to recover losses from the contractor, who is not bound by your lease or licence as they are not a party to that agreement.

Get in touch with our Construction Team

Our specialist Construction Team is experienced in identifying and addressing risks before problems arise. We offer cost-effective, tailored contracts that help safeguard your home and your finances, giving you peace of mind.

Making this small investment now could save you significant time, stress, and expense later – potentially avoiding costly litigation. Get in touch to find out how we can help.

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