Generally a charity is entitled to relief from stamp duty land tax (SDLT) provided that:
- the charity intends to hold the subject-matter of the transaction (or the greater part of it) for qualifying charitable purposes; and
- the transaction must not have not been entered into for the purpose of avoiding SDLT (whether by the purchaser or any other person).
However, in The Pollen Estate Co Ltd (1) King’s College London (2) v HMRC the Upper Tribunal ruled that charities relief is available for joint purchasers only if all purchasers are charities.
On appeal the Court of Appeal upheld the Tribunal’s decision that, for each property acquisition, there was a single SDLT land transaction, namely the acquisition of the equitable estate in the relevant property.
However, the Court allowed the appeal on the basis that Parliament must have intended that charities relief be available on a joint purchase to the extent that a purchaser was a charity (provided that the general conditions are met).
The Court came to its decision on the basis that the Tribunal had adopted an unduly literal interpretation of the legislation, which was contrary to the public policy objectives of the relief.
Instead the Court found that charity relief is available to a charity on its proportionate undivided share in a property acquired jointly with a non-charity purchaser.
The judgment can be downloaded here.
Invitation to claim overpaid SDLT
HMRC has now invited charities to claim overpaid SDLT as a result of the Court of Appeal’s decision.
This invitation applies to any charity which (i) has purchased a property jointly with a non-charity and satisfied the conditions for SDLT charity relief but (ii) did not claim because of the non-charity joint purchaser.
HMRC’s update can be accessed on its website here.
For more information please contact James Armstrong on 0191 211 7977.