Read the original guidance here:
HMRC SDLT: SDLTM26010 – Reliefs: Charities relief: Detailed rules to qualify for the relief FA03/SCH8/PARA1

Stamp Duty Land Tax Relief for Charities

Charities can receive relief from Stamp Duty Land Tax (SDLT) when they buy a chargeable interest that they plan to keep for charitable purposes. To qualify for this relief, the charity must meet specific criteria under the rules of the Finance Act 2003 (FA03/SCH8/PARA1).

Understanding Chargeable Interest

A chargeable interest generally refers to an interest in land, such as freeholds and leaseholds. For a charity, it typically means any property or land that they buy and intend to utilize in line with their charitable objectives.

Qualifying Charitable Purposes

The charity must show that it intends to use the purchased property for charitable reasons. This includes:

• Advancing Charitable Purposes: The property must contribute to furthering the charity’s goals, such as hosting events or activities that support their mission.
• Investment Use: If the property is intended as an investment, any profits generated must be used to fund the charitable activities of the charity.
• Keeping it Genuine: The transaction should not be made solely to avoid paying SDLT. This applies to both the charity making the purchase and any other individual or entity involved.

Criteria for Charitable Status

For a charity to qualify for SDLT relief, it must meet certain requirements set out in FA10/SCH6:

• Established for Charitable Purposes: The charity must be formed solely to serve charitable goals. This means that its activities and objectives must be focused on providing public benefit.
• Meet Definition of a Charity: The charity must align with the UK’s legal definition, which includes having a charitable purpose recognized by law.
• Judicial Control: The charity must be overseen by a court concerning its charitable status. For UK charities, this would be either the High Court in England, the Court of Session in Scotland, or the High Court in Northern Ireland. For charities outside the UK, the court must have a similar level of authority.
• Registered Status: If local laws require it, the charity must be officially registered. This is especially important in ensuring that it operates within the confines of local legislation.
• Proper Management: The charity must be led and managed by individuals deemed “fit and proper,” meaning they are suitable to oversee charitable activities and finances.

Fit and Proper Persons Test

To ensure that charities are managed effectively and responsibly, there’s a ‘fit and proper’ persons test. This test checks the qualifications and integrity of individuals running the charity. More details on what this involves can be found at Charities Guidance on Fit and Proper Persons.

Charity Reference Number

When completing the process for SDLT relief, if the purchasing charity has an official charity reference number or similar ID issued by their national administration, this must be included in Part 3 of Question 9 on the SDLT return.

For charities based outside the UK, it’s necessary to obtain a charity reference number from HMRC. More information on how to get this number can be found at HMRC Charities and Tax.

Defining Genuine Use

It’s important to note that the rules are designed to support the authentic use of properties purchased by charities for their missions. Most legitimate charities will have no problems meeting these conditions.

Example Scenario

To illustrate how these rules apply, let’s consider an example from the guidance:

• Providing a Dwelling: A vicar or priest may live in a property bought by a charity, as long as the charity demonstrates that the residence is necessary for the advancement of their religious or charitable activities. In this case, the dwelling serves a purpose aligned with the charity’s goals, thus qualifying for SDLT relief.

This means that if the charity can show that the property is essential for their work—like hosting community events or supporting the charity’s personnel—they can benefit from SDLT relief.

Final Thoughts on SDLT Relief for Charities

In summary, SDLT relief is a helpful benefit for charities looking to purchase properties for their missions. By fulfilling the outlined requirements and ensuring they intend to utilize the properties for charitable purposes, charities can enjoy significant financial relief during property transactions. This promotes greater investment in their charitable activities and helps advance their objectives for public good.