Stamp duty land tax (SDLT) relief for charities is almost always granted; it is only in very few circumstances that your charity or charitable organisation would not fit the requirements for stamp duty charity exemption.
A charity is defined by the government as a body of people or a trust that is established for charitable purposes only and is registered as a charity or charitable organisation that is managed by “fit and proper” individuals.
To claim a stamp duty charity exemption the charity must have purchased property or land which they plan to use for charitable purposes, this includes housing, a shop, office space or any other land or space used by the charity to aid their cause.
When Can You Claim Stamp Duty Charity Exemption?
Charities are usually granted charity stamp duty exemption or relief. This SDLT exemption also extends to charitable trusts provided that all of the unit holders are charities within their rights.
Charity stamp duty exemption is provided if the following conditions apply:
- The land is held for qualifying charitable purposes, either being used:
- To further the charitable purposes of the purchaser or those of another charity who will benefit from the use of the land held.
- Or as an investment with the profits derived from the land being applied to the charitable purposes of the purchaser.
- The transaction wasn’t entered into avoidance of tax by the charity or any other person.
To apply for charity stamp duty exemption your charity must have been registered under the charities regulator and have been granted full charitable status.
Charity Stamp Duty Exemption And Joint Ownership
Charities that have jointly purchased a property with an organisation which is not a charity such as a trading arm can now claim for overpaid SDLT. This was due to a decision made by the Court of Appeal in 2013 stating that charity stamp duty exemption was limited to where a charity uses the largest part of its share of the property for a charitable purpose.
The amount of stamp duty land tax to be paid by a non-charity partner will still be based on a percentage of the total cost of the property. This may also apply where charities have entered into an equity-sharing type of arrangement.
Retaining Charitable Status For Tax Exemption
Once your charity has been granted charitable status it then must meet certain criteria on an annual basis to retain its charitable status and therefore remain exempt from paying stamp duty land tax.
- Once granted a charitable status your charity or organisation must continue to:
- Remain tax compliant.
- Maintain its charitable status with the charities regulator.
- Comply with the Charities Act (2009).
- Use all of its income for its main charitable purposes only.
- Keep accurate records and accounts.
Your charity or organisation may lose its status as a charity if the following conditions are not met:
- A copy of the first year’s financial statements is not submitted within 18 months of receiving the charity stamp duty exemption.
- Audited accounts are not kept when your total income exceeds £100,000
- Notification of any changes to details is not raised with HMRC.
Changes to Stamp Duty Exemption For Charities
In 2023 it was announced that the government would be amending the definition of a charity for several tax purposes including stamp duty land tax, this change would be outlined in the Spring Finance Bill 2023. Before this change, UK charities could qualify for stamp duty charity exemption, but following the change only those charities that fall within the jurisdiction of the High Court in England, Wales or Northern Ireland will qualify for UK charity stamp duty exemption and other charitable tax reliefs.
For stamp duty land tax purposes, this change will take effect from April 1st 2024 for any charity or organisation that applied for charitable status on or before 15 March 2023 and at any time before then has made a valid claim to HMRC concerning their status as a charity.
How Can CapEx Tax Help?
If you think that you are due charity stamp duty land tax exemption or that you have been unfairly taxed as a charitable organisation or trust then contact us today so that we can begin to gather relevant information and documentation to support you through your claim. Don’t wait to make a claim, our tax specialists will guide you through the whole process to make it as easy as possible for you.