Controls on what you can do

Tax considerations

Tax considerations

There are fairly comprehensive reliefs for charities in respect of income and capital taxes from property but there are cases where relief does not apply.

  • Charities should be particularly careful where the user of their property under a lease or a licence is also receiving other services as part of a package because in that case the whole transaction may be regarded as trading rather than is a receipt from property. [Direct taxes]
  • There are also particular statutory traps where a charity intends to involve itself in the development of a property that it intends to sell, or plans to obtain a further payment for property that is to be sold after it has been developed by another (overage etc).  [Direct taxes]
  • Stamp Duty Land Tax is a tax that applies to purchases and receipt or acquisition of leases.  Again, there are fairly comprehensive reliefs for charities but there are some circumstances where tax will be paid, for example where purchased land may be sold on rather than used for charitable purpose. [Stamp Duty Land Tax]
  • VAT will generally apply to supplies of property where the occupier is not granted any defined space (e.g. a “desk space” licence or a market stall) and may apply to any property where the landlord has opted to tax, i.e. notified HMRC that the usual exemption from VAT is not to apply to further supplies of property. [Value Added Tax]
  • Intended use of property by charities may also permit zero-rating of new construction costs. [Value Added Tax]
  • Business rates are a tax on the occupation of property or the ownership of empty property.  Business rate relief is generally available to some charities at a rate of 80%, and discretionary relief may be available for the remaining 20% for charities and generally for certain other organisations. [Business rates]
  • Councils are increasingly receiving direct benefits from business rates where they did not do so before, and it is therefore important to ensure that charities do not have their exemption threatened by virtue of the arrangements for occupation of property. [Business rates]