A ruling by the Court of Appeal now means that charities who have jointly purchased a property with a company which is not a charity can claim for overpaid stamp duty land tax (SDLT).
In June, the Court of Appeal overruled a decision by the Upper Tier Tax Tribunal in the case of The Pollen Estate Trustee Company Ltd and Kings College London v HMRC.
The Tribunal ruled that because the purchasers had a joint obligation to file a single land transaction return, SDLT relief on the charity’s half of the purchase was not allowed.
However the Court of Appeal overturned this judgement, ruling that relief is limited to where a charity uses the greater part of its share of the property for a charitable purpose. The portion 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 acquired.
An example given by HMRC is: A charity and a non-charity 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.
Charities which have been denied the relief can claim for back-dated refunds and repayment interest will applicable at the rate applicable under section 178 of the Finance Act 1989, paid on the amount of any repayment, calculated from the time at which the SDLT was paid.