bare trust
(naked trust, simple trust) A trust under which the trustee is under no obligation except to hold the trust property in trust for an adult beneficiary who is sui juris and to deal with the trust property only as instructed by the beneficiary (compare active trust). A bare trustee is therefore a nominee.

Where assets are held on a bare trust, the capital gains tax charge arises on the beneficiary and not on the trustee. For capital gains tax purposes, a trust is treated by statute as a bare trust if the beneficiary has the exclusive right to require the property to be passed to him, subject only to satisfying any outstanding charge, lien, or other right. (However, see Stephenson v Barclays Bank Trust Co Ltd [1975] 1 WLR 882 (Ch); Crowe v Appleby [1975] 1 WLR 885; Booth v Ellard [1980] STC 555).

For tax purposes, there may also be a bare trust where property is held for an infant or an adult without mental capacity. However, for such property to be treated as being held on a bare trust the incapacity (whether by virtue of age or mental condition) of the beneficiary must be the only reason for his not being absolutely entitled (Tomlinson v Glyn’s Executor and Trustee Co [1980] 45 TC 607).

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