As a result of Court of Appeal rulings on two key cases, HMRC has told charities they are eligible to make claims for any overpaid stamp duty land tax (SDLT) on property purchases.
The judgment relates to cases of the Pollen Estate Trustee Company Ltd and Kings College London v HMRC and was released in June.
It states that when a charity purchases property jointly with another person who is not a charity, relief from SDLT under paragraph 1 of Schedule 8 to the Finance Act 2003 is available on the charity's share of the property. Relief is subject to a test based on the extent to which the charity's share is used for charitable purposes.
The judges in the Court of Appeal confirmed HMRC's view that a joint purchase is the acquisition of one chargeable interest for SDLT purposes. Under section 55 of the Finance Act 2003, the rate of SDLT applicable to a chargeable transaction is calculated by reference to the chargeable consideration for the entire interest purchased.
Thus, in the cases described, while the charity (if it meets the conditions) will pay no SDLT on its share, and while the non-charity pays SDLT only on its share of the interest, the applicable rate of tax is that which would be applicable to the total chargeable consideration for the purchase.
As an illustration, HMRC gives the example of a charity and a non-charity who jointly purchase a non- residential property for £800,000, each owning a 50% undivided share in the property. The charity intends to use its portion of the property wholly for charitable purposes. Under section 55 the SDLT due on the purchase is £32,000 (£800,000 x 4%). Charities relief is available on £16,000 of this, with £16,000 SDLT payable on the proportion of the interest held by the non-charity purchaser.
HMRC says that any charities that purchased a property jointly with a non-charity purchaser, satisfied the relevant conditions, but did not claim the relief can now make a claim. The time limit for doing so is 12 months after the filing date for the return, and HMRC will be contacting anyone whose land transaction return has already been subject to an enquiry.
Charities who want to make a claim should write to the Birmingham Stamp Office, with details of the original land transaction return and information about the size of their share of the purchases, plus evidence of the intent to use it for charitable purposes.
.HMRC says interest at the rate applicable under s178 of Finance Act 1989 will be paid on the amount of any repayment, calculated from the time at which the SDLT was paid.
