Charities Relief: Exemption Conditions for Land Transactions by Charitable Trusts

SDLT charities relief where only most of the land is for charitable use

A charity or charitable trust can still get full SDLT charities relief when buying land if it intends to use the greater part of the land for qualifying charitable purposes. The key test is whether at least 51% of the land’s monetary value will be held for those purposes at the time of purchase. If that test is met, full relief can apply upfront, but part of it may later be withdrawn if some of the land is sold, leased in a way treated as a disposal, or used for non-charitable purposes.

• Relief is available if 51% or more of the land’s value, not just its size or area, is intended for qualifying charitable use.
• If the 51% value test is met, the whole purchase can qualify for SDLT charities relief at the outset.
• Relief is not necessarily permanent: a relevant part can be clawed back later if part of the land is disposed of or no longer used for qualifying charitable purposes.
• HMRC treats the grant of a low-rental premium lease, with rent under £1,000 a year, as a disposal for this purpose.
• Valuation can be difficult in mixed-use or development sites, so evidence of value and the charity’s intended use at the purchase date is important.

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SDLT charities relief where a charity keeps most, but not all, of the land for charitable use

This page explains a specific part of SDLT charities relief. It deals with cases where a charity or charitable trust buys land and does not intend to use all of it for qualifying charitable purposes, but does intend to use the greater part of it in that way. In those cases, the transaction can still qualify for full relief at the outset, but part of that relief may later be withdrawn if part of the land is disposed of or used for non-charitable purposes.

What this rule is about

Charities relief from SDLT is normally linked to how the charity intends to hold and use the land it acquires. The issue here is what happens when the land is mixed in character: most of it will be held for qualifying charitable purposes, but some of it will not.

The rule is designed to avoid denying relief altogether just because a small part of the land falls outside the charity’s qualifying use. At the same time, it prevents the charity from keeping full relief if, in substance, part of the land is later taken out of charitable use or disposed of.

What the official source says

The HMRC manual says that where a charity or charitable trust cannot claim relief on the basis that it intends to hold the whole of the land for qualifying charitable purposes, it may still obtain relief if it intends to hold the greater part of the land for those purposes.

For this purpose, the greater part means 51% or more of the monetary value of the land.

If that test is met, the whole transaction is exempt from charge at the time of purchase.

The manual then says that if the charity later disposes of part of the land, or holds part of it for purposes other than qualifying charitable purposes, a relevant portion of the relief is clawed back. HMRC also states that, for this purpose, a disposal includes the grant of a low-rental premium lease, meaning a lease with rent of less than £1,000 per year.

The stated aim is to make sure that the relief ultimately retained is proportionate to the share of the land that the charity continues to hold in furtherance of its charitable aims.

What this means in practice

The practical effect is that the charity looks first at its intention at the effective date of the transaction. If it intends to hold at least 51% of the land’s monetary value for qualifying charitable purposes, the purchase can qualify for full charities relief at that point, even though some of the land is not intended for qualifying use.

That does not mean the non-charitable part is ignored forever. The relief is given in full upfront, but it is vulnerable to partial withdrawal later.

The clawback mechanism matters where:

• part of the land is sold or otherwise disposed of;
• part of the land stops being held for qualifying charitable purposes; or
• the charity grants a low-rental premium lease, which HMRC treats as a disposal for this purpose.

The amount withdrawn is not described in detail on this page, but the manual makes clear that only a relevant portion is clawed back. The underlying idea is proportionality: the charity keeps relief only to the extent that the land remains held in furtherance of its charitable purposes.

How to analyse it

A sensible way to approach this rule is to ask the following questions.

• Is the purchaser a charity or charitable trust for the purposes of the relief?
• At the time of acquisition, what is the intended use of each part of the land?
• Does at least 51% of the monetary value of the land satisfy the qualifying charitable purposes test?
• How has that 51% figure been established? The rule looks to monetary value, not simply area or floor space.
• Is any part of the land later sold, leased in a way treated as a disposal, or used for non-qualifying purposes?
• If so, what proportion of the original relief should be withdrawn to reflect the part no longer retained for charitable use?

The reference to monetary value is important. A small physical part of a site may represent a large share of the value. Equally, a large area may have relatively little value. The test is not based on acreage alone.

Example

A charity buys a site made up of two elements: a building it will use for its charitable activities, and a smaller development plot that it does not intend to use for qualifying charitable purposes. The building represents 70% of the total value of the land, and the plot represents 30%.

Because the charity intends to hold the greater part of the land, measured by value, for qualifying charitable purposes, the purchase can qualify for full SDLT charities relief at the outset.

If the charity later disposes of the development plot, or begins to hold part of the site for non-qualifying purposes, part of the relief may be clawed back. The amount withdrawn should reflect the portion of the land no longer retained for the charity’s qualifying use.

Why this can be difficult in practice

The main difficulty is often valuation. The rule depends on whether 51% or more of the monetary value of the land is intended to be held for qualifying charitable purposes. That can be straightforward where the site is clearly divided into separate assets with obvious values, but harder where value is affected by planning potential, shared access, mixed-use buildings, or future development prospects.

Another difficulty is identifying the relevant intention at the time of the transaction. The rule is framed by reference to what the charity intends to hold for qualifying charitable purposes. In practice, that may require careful evidence from board papers, transaction documents, funding arrangements, or planned use of the site.

There can also be judgement involved in deciding whether a later arrangement amounts to a disposal or a non-qualifying use. The manual gives one specific example by saying that the grant of a low-rental premium lease counts as a disposal. That means charities and their advisers need to look beyond outright sales when considering whether relief could later be withdrawn.

Key takeaways

• A charity can still get full SDLT charities relief on purchase if it intends to hold at least 51% of the land’s value for qualifying charitable purposes.
• The 51% test is based on monetary value, not just physical size.
• If part of the land is later disposed of or used for non-qualifying purposes, a proportionate part of the relief may be clawed back.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Charities Relief: Exemption Conditions for Land Transactions by Charitable Trusts

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