Update: SDLT Charities' Relief

 
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Summary and implications

Following the recent Pollen Estate Court of Appeal decision, legislation has been introduced in the Finance Bill 2014 regarding the SDLT relief available to a charity where it purchases a property jointly with a non charity purchaser.

The changes make it clear that:

SDLT relief is available on a charity's share of a property as long as the charity uses the "greater part" of its share for a charitable purpose; the amount of SDLT relief is calculated with respect to the proportion of the overall purchase price paid by the charity or the proportion of the charity's share in the property, whichever is lower; and SDLT is payable by the non-charity purchaser, on its share of the property only, at a rate determined by the combined price paid by the charity and non-charity purchaser

Related item:

Charities can claim relief from SDLT on a joint purchase

Our briefing on the Pollen Estates case. More

Background

The Court of Appeal in Pollen Estates held that when a charity purchased a property jointly with a non-charity purchaser, it could claim SDLT relief on its share of a property.

The Court of Appeal reached this decision by "reading in" its own further wording to the existing legislation providing for SDLT relief when a charity is a sole purchaser of a property. HMRC were concerned that this judgement could be exploited to avoid SDLT.

HMRC's particular objection, raised during the case, was that there was no mechanism in the legislation to determine the share of the charity's interest in a property in order to determine the amount of relief. The judge in the case did not consider this a valid objection, noting that it could not be an insurmountable issue as there was also no mechanism for calculating the "greater part" when determining whether the "greater part" of the charity's interest in land is used for "qualifying charitable purpose" in order to claim the relief.

HMRC has now introduced legislation to close off their perceived issues with the decision and introduce a mechanism to determine a charity's share of a property. Interestingly, HMRC has...

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