HMRC SDLT: SDLTM26035 – Reliefs: Charities relief – Non Charity Purchasers

Charities Relief for Non-Charity Purchasers

This section of the HMRC internal manual provides guidance on the application of charities relief for non-charity purchasers. It outlines the principles and conditions under which relief can be claimed, ensuring compliance with relevant tax regulations.

• Explains eligibility criteria for charities relief.
• Details the process for claiming relief by non-charity purchasers.
• Highlights the importance of adhering to HMRC guidelines.
• Provides examples of applicable scenarios.

Stamp Duty Land Tax Relief for Charities Acquiring Property

This article explains the relief available from Stamp Duty Land Tax (SDLT) for charities when they buy property alongside non-charities. It sets out the key ideas around eligibility, requirements, and the type of relief that can be claimed.

What is Partial Relief?

Charities can receive Partial Relief from SDLT when they acquire property together with one or more non-charitable buyers. This can happen in a few different scenarios:

• A qualifying charity buys a share of property as a tenant in common with a non-charity.
• A non-charity buys property but has the intention of using it for charitable purposes.

The important conditions are:

• The charity must not have any tax avoidance motive in the transaction.
• The charity must plan to use its part of the property for qualifying charitable purposes.

Calculating Relief

The amount of relief a charity can claim is based on its share of the property or the amount it contributes financially. Specifically, the relief can be calculated as follows:

• Relief is available based on whichever is lower: the proportion of the property owned by the qualifying charity or the amount paid by the charity towards the purchase.

For example, if a charity buys a property worth £300,000 as part of a joint purchase with a non-charity, and the charity contributes £100,000, the relief will be calculated based on that £100,000. If the charity holds a 30% share of the property, then the relief applies to the lower of these two amounts.

Conditions for Withdrawal of Relief

If a charity that has claimed relief no longer meets the eligibility criteria, the relief may be withdrawn. This could happen in the following situations:

• If the charity stops being established strictly for charitable purposes.
• If the property acquired (or any interest derived from it) is no longer used for qualifying charitable purposes.

For instance, if a charity initially buys a building to operate a community centre, but later it starts using the building for non-charitable activities, it could lose the SDLT relief. Similarly, if the charity changes its status and is no longer considered a qualifying charity, relief would also be revoked.

Relief for Non-Qualifying Charities

Relief may still be applicable even if the purchasing charity does not meet the full qualifying criteria. If it plans to use most of its share of the property for charitable purposes, it can still benefit from some relief. The following points summarize this situation:

• The charity need not be a qualifying charity, as long as it intends to hold most of its share for qualifying charitable purposes.
• This aims to support charities that might not strictly fall under the usual qualifying definitions but still aim to operate for charitable causes.

For example, if a charitable group buys a property but only partially qualifies under the rules, they can still receive relief if their main intention is to use the property for charity work, such as hosting events or providing community services.

Eligibility Criteria for Charitable Purposes

To determine if a charity meets the requirements for SDLT relief, the following points should be considered:

• The charity must be properly registered and active in serving the community or a charitable cause.
• The property must be utilized in line with the charity’s objectives, which often involves charitable work, fundraising, or community services.

It is always recommended to maintain clear records that outline how the property will be used and to ensure compliance with ongoing charitable objectives.

Documentation and Reporting

Any charity looking to claim SDLT relief must ensure that all relevant documents are in order. Here is what is typically required:

• A copy of the purchase agreement showing the charity’s proportional ownership.
• Evidence that the charity is registered and operating as a charity.
• Clarification on how the property will be used for charitable purposes, which may include operational plans or community benefit statements.

These documents should be kept on file and presented to tax officials if requested. Keeping everything well documented will facilitate a smoother relief claim process.

How to Claim SDLT Relief

When a charity is eligible for relief, it can claim this when submitting their SDLT return. Here are the steps involved in the process:

• Complete the SDLT return accurately, including all details regarding joint purchases and proportional ownership.
• Clearly indicate that the charity is claiming SDLT relief on the relevant portion of the property.
• Submit the claim within the stipulated time frame, as late submissions can lead to penalties or loss of relief.

It is crucial to follow these steps to ensure the charity does not miss out on potential financial support through SDLT relief.

Consulting Professionals

Considering the complexities surrounding SDLT and the qualification of relief, charities may benefit from seeking professional advice. Here’s why consulting with an expert can be helpful:

• Tax professionals can provide tailored advice based on the specific circumstances of the charity.
• They can ensure that all documentation is correctly completed and submitted on time.
• Experts can help clarify ongoing compliance with charitable purposes to avoid any future withdrawal of relief.

Hiring a professional can often save time and reduce the risk of errors that could lead to financial loss or legal issues.

Common Scenarios for Charitable Property Purchases

Understanding various scenarios can help charities make informed decisions when purchasing property. Here are some common situations:

• A charity collaborates with a local business to purchase a community building, where both parties have specific roles in its management. The charity can claim relief based on its contribution and share.
• A non-charitable group wants to buy land primarily for an event. They agree to let a charity use a significant part of the land. If the charity pays its share, it may still benefit from relief.
• A charity approaches a property developer to buy part of a new project, intending to provide community services in that space.

Each of these examples shows how charities can navigate buying property strategically while ensuring they adhere to SDLT regulations.

Further Information

For further inquiries and detailed guidance, charities can visit dedicated resources such as this link to HMRC guidance for specific scenarios regarding SDLT relief. It is important for charities to stay informed and compliant with current regulations.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM26035 – Reliefs: Charities relief – Non Charity Purchasers

View all HMRC SDLT Guidance Pages Here