Finance Act 2014

Section 113

SCHEDULE 23 SDLT: charities relief

1 Schedule 8 to FA 2003 (stamp duty land tax: charities relief) is amended as follows.

2 In paragraph 1 (conditions for charities relief)—

(a) in sub-paragraph (2), omit the words from “that is” to the end;

(b) in sub-paragraph (3), for “not been” substitute “been”;

(c) after sub-paragraph (3) insert—

“(3A) For the purposes of this Schedule, a charity (“C”) holds a chargeable interest for qualifying charitable purposes if it holds it—

(a) for use in furtherance of the charitable purposes of C or another charity, or

(b) as an investment from which the profits are applied to the charitable purposes of C.”

3 After paragraph 3 insert—

“Joint purchasers: partial relief

3A (1) Sub-paragraphs (3) to (5) apply in any case where—

(a) there are two or more purchasers under a land transaction,

(b) the purchasers acquire the subject-matter of the transaction as tenants in common (or, in Scotland, as owners in common),

(c) at least one of them is, and at least one of them is not, a qualifying charity, and

(d) no purchaser enters into the transaction for the purpose of the avoidance of tax under this Part (whether by that purchaser or another person).

(2) A charity (“C”) that is a purchaser under a land transaction is a “qualifying charity” in relation to the transaction if C intends to hold its undivided share of the subject-matter of the transaction for qualifying charitable purposes.

(3) The tax chargeable in respect of the transaction is reduced by the amount of the relief under sub-paragraph (4).

(4) The relief is equal to the relevant proportion of the tax that would have been chargeable in respect of the transaction without this Schedule.

(5) The “relevant proportion”, in the case of a qualifying charity, is the lower of P1 and P2, where—

• P1 is the proportion of the subject-matter of the transaction that is acquired by all the qualifying charities that are purchasers under the transaction (in aggregate);

• P2 is the proportion of the chargeable consideration for the transaction that is given by all the qualifying charities that are purchasers under the transaction (in aggregate).

Withdrawal of relief given under paragraph 3A

3B (1) This paragraph applies where—

(a) relief has been given under paragraph 3A in respect of a transaction (“the relevant transaction”),

(b) a disqualifying event occurs in relation to a qualifying charity (“C”) which was a purchaser under the transaction, and

(c) the disqualifying event occurs in the circumstances required by sub-paragraphs (2) and (3).

(2) The disqualifying event must occur—

(a) before the end of the period of 3 years beginning with the effective date of the transaction, or

(b) in pursuance of, or in connection with, arrangements made before the end of that period.

(3) At the time of the disqualifying event C must hold a chargeable interest that—

(a) was acquired by C under the relevant transaction, or

(b) is derived from an interest so acquired.

(4) There is a “disqualifying event” in relation to C if —

(a) C ceases to be established for charitable purposes only, or

(b) the chargeable interest acquired by C under the transaction, or any interest or right derived from that interest, is used or held by C otherwise than for qualifying charitable purposes.

(5) C’s portion of the relief mentioned in sub-paragraph (1)(a), or an appropriate proportion of C’s portion of that relief, is withdrawn and tax is chargeable in accordance with this paragraph.

(6) The amount chargeable is equal to C’s portion of the relief or, as the case may be, the appropriate proportion of C’s portion of the relief.

(7) C’s portion of the relief depends on whether P1 or P2 was lower in the calculation under paragraph 3A(5).

(8) If P1 was lower, C’s portion of the relief is equal to—

where—

• p1 is the proportion of the subject-matter of the transaction that was acquired by C under the transaction;

• P1 has the same meaning as in paragraph 3A(5);

(9) If P2 was lower, C’s portion of the relief is equal to—

where—

• p2 is the proportion of chargeable consideration for the transaction that was given by C;

• P2 has the same meaning as in paragraph 3A(5);

(10) In sub-paragraphs (5) and (6) “appropriate proportion” means an appropriate proportion having regard to—

(a) what was acquired by C under the relevant transaction and what is held by C at the time of the disqualifying event, and

(b) the extent to which what is held by C at that time becomes used or held for purposes other than qualifying charitable purposes.

Partial relief: charity not fully meeting the “qualifying charity” condition

3C (1) This paragraph applies where—

(a) a charity (“C”) is one of two or more purchasers acquiring the subject-matter of a land transaction (“the relevant transaction”) as tenants in common (or, in Scotland, as owners in common),

(b) C is not a qualifying charity in relation to the transaction,

(c) paragraph 3A(3) to (5) would apply if C were a qualifying charity, and

(d) C intends to hold the greater part of its undivided share of the subject-matter of the transaction for qualifying charitable purposes.

(2) In such a case—

(a) paragraph 3A has effect as if C were a qualifying charity, but

(b) for the purposes of paragraph 3B (withdrawal of relief under paragraph 3A) “disqualifying event” includes any additional disqualifying transaction.

(3) The following are “additional disqualifying transactions” if they are not made in furtherance of the charitable purposes of C—

(a) any transfer by C of a major interest in the whole or any part of the chargeable interest acquired by C under the relevant transaction;

(b) any grant by C at a premium of a low-rental lease of the whole or any part of that chargeable interest.

(4) Paragraph 3(3) (meaning of “at a premium” and “low-rental”) applies for the purposes of sub-paragraph (3)(b) as it applies for the purposes of paragraph 3(2)(b)(ii).

(5) In relation to a transaction that, by virtue of this paragraph, is a disqualifying event for the purposes of paragraph 3B—

(a) the date of the event for those purposes is the effective date of the transaction;

(b) paragraph 3B has effect with the modifications in sub-paragraph (6).

(6) The modifications to paragraph 3B are—

(a) in sub-paragraph (3), for “At the time of” substitute “Immediately before”;

(b) in sub-paragraph (10)(a), for “at the time of” substitute “immediately before and immediately after”;

(c) omit sub-paragraph (10)(b).”

4 In paragraph 4(3) (charitable trusts)—

(a) in paragraph (a), for the words from “references” to “are to” substitute “references in paragraph 1(3A) to the charitable purposes of C are to those of”;

(b) in paragraph (b), for “reference” substitute “references” and for “is” substitute “, and to C in paragraph 3B(4)(a), are”;

(c) in paragraph (c), for the words from “reference” to “is” substitute “references in paragraphs 3(2)(b) and 3C(3) to the charitable purposes of C are”.

5 The amendments made by this section have effect in relation to any transaction of which the effective date (within the meaning of Part 4 of FA 2003) is on or after the day on which this Act is passed.