A guide to stamp duty relief for charities
Monday, 6 August 2012 8:18 AM
Most of the talk surrounding stamp duty land tax in the UK tends to focus on residential rates and whether or not they need to be amended or abolished.
Not much talk goes on surrounding commercial property taxes.
Given the subdued state of the commercial property sector, this may not come as much of a surprise.
With the exception of London, most of the UK's commercial property market has seen the number and value of transactions stagnate or fall.
However, it is important to be aware of stamp duty with regards to commercial property and the potential exemptions that exist.
One type of business that can enjoy a relief from stamp duty is charities - provided certain conditions are met.
HMRC states that relief is available to charities and charitable trusts, although the relief available differs between the two.
For charities, relief is available on the purchase of chargeable interest that they plan to hold for qualifying charitable purposes.
The premises must be for use in the furtherance of the charitable purposes or as an investment - the profits from which are applied to the charitable purposes of the buyer.
In addition, the charity must not enter into the transaction with the explicit aim of avoiding stamp duty.
To qualify, the charity must be established for charitable purposes only and be subject to the courts in the UK, another EU member state, Iceland or Norway.
Also, the charity must be administered or controlled by 'fit for purpose' persons. A test must be taken before this status is bestowed on someone.
Provided these conditions are met, stamp duty relief is applicable.
However, there are instances where the relief can be removed and the charity has to pay the full amount of stamp duty.
These include if the charity ceases to be a charity and if it uses the property for purposes that are not deemed to be charitable.
HMRC also points out that the relief is withdrawn in these circumstances only if the property is still owned by the charity.
As with most stamp duty exemptions, there are other strings attached.
Partial relief is not available for charities and where the chargeable interest is purchased by joint purchasers, other conditions apply.
In the case of joint purchasers, all parties must be charities and the conditions as to the use of the property must be satisfied.
If any of the parties involved in the transaction are not charities, then no relief is available.
Charities then are bound by some quite stringent legislation if they want to qualify from stamp duty relief.
However, there is another way that businesses of all kinds can avoid their stamp duty liabilities altogether or significantly reduce their overall bill.
This is known as stamp duty mitigation and there are numerous companies in the UK offering these services.
Mitigation works by putting together schemes that are fully compliant with UK tax laws.
It is important to note that mitigation is not the same as evasion, which is completely illegal.
If you are keen to learn more about how it works, you should contact various mitigation firms directly.
The schemes should be able to save you a significant amount and not impact on your ability to secure a mortgage.
Also, the company must have them scrutinised by top tax QCs before they submit them to HMRC.
