General legal issues

Stamp Duty Land Tax

Stamp Duty Land Tax

Stamp Duty Land Tax is a tax payable on property transactions, principally leases and transfers of freeholds.

  • The tax is generally payable on completion of a contract to sell a property or grant a lease, or on the grant of a lease without any contract. However, the tax could be payable at an earlier stage if the organisation enters onto or into the property before the formal completion date.
  • The amount of SDLT is calculated on the purchase price of the property or the total rent arising over the term of the lease.
  • Charities are generally exempt from Stamp Duty Land Tax but the transaction must not have been entered into for the purpose of avoiding tax.
  • The property must also be used for one of two qualifying purposes: in furtherance of the charitable purposes of the purchaser or of another charity; or as an investment from which the profits are applied to the charitable purposes of the purchaser (includes letting at market value).
  • However if the charity purchaser ceases to be established for charitable purposes within three years, then the charge to SDLT can arise.  This could include conversion of a charity into a Community Interest Company, even though the property itself would probably continue to be held on trust for charitable purposes.
  • Furthermore, if the purchaser (i.e. not someone who has acquired the property from the purchaser) uses the subject-matter of the transaction, or any interest or right derived from it, otherwise than for qualifying charitable purposes within three years of acquisition, there will be a potential tax charge.  In most cases, it is difficult to see how such a circumstance could lawfully arise for a charity, since their trusts will require them to hold the property either as an investment or for charitable purposes.
  • If most of the land is not intended to be retained and used for a qualifying charitable purpose, then the whole of the property purchased will be subject to SDLT in the usual way.  However, if the greater part of the property is acquired with the intention that it is to be used for a qualifying charitable purpose, there is no initial SDLT charge.  However, if a proportion of the land is subsequently sold as planned it will be subject to a SDLT charge.