Clause 106 - SDLT: charities relief

Finance Bill – in a Public Bill Committee at 3:30 pm on 10 June 2014.

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Question proposed, That the clause stand part of the Bill.

Photo of Gary Streeter Gary Streeter Conservative, South West Devon

With this it will be convenient to discuss schedule 19.

Photo of Shabana Mahmood Shabana Mahmood Shadow Minister (Treasury)

Clause 106 is being introduced as a result of a Court of Appeal judgment handed down on 26 June 2013 in the case of the Pollen Estate Trustee Company Ltd and King’s college London v. HMRC. The substance of that judgment was that when a charity purchases property jointly with a non-charity purchaser, relief from SDLT under paragraph 1 of schedule 8 to the Finance Act 2003 is available on the charity’s share of the property. Relief is subject to a test, based on the extent to which the charity’s share is used for charitable purposes.

In the light of that judgment, HMRC has invited claims for any overpaid SDLT from charities that purchased property jointly with a non-charity purchaser and that satisfied the relevant conditions, but did not claim the relief. Relief is limited to circumstances where the charity used the greater part of its share of the property for a charitable purpose. Where HMRC has opened an inquiry into the relevant land transaction return, it has been in touch with the charities concerned.

We are told that the measure is expected to have a negligible impact on the Exchequer, and the impact note estimates that fewer than 100 charities a year will be affected by the change and that the compliance costs to the charities are expected to be minimal. I would be grateful if the Minister could confirm that. Also, can he tell us how many charities since the Court of Appeal  judgment have claimed the overpayment of stamp duty land tax, the value of those claims and whether he is confident that there has been no exploitation of the relief available for the avoidance of SDLT?

Photo of David Gauke David Gauke The Exchequer Secretary

Clause 106 and schedule 19 make it clear that partial relief from stamp duty land tax is available where a charity purchases property jointly, as tenants in common, with a non-charity purchaser. The change is being made in response to a Court of Appeal judgment, as the hon. Lady rightly pointed out. The Court ruled that where a charity purchases property jointly with a non-charity purchaser, the charity could claim relief on its share of the property. Without the change, it would not have been clear from the legislation that partial relief is available. The legislation will provide certainty for taxpayers about the availability of relief and the amount of relief that the charity can claim. The change will also ensure that the availability of partial relief cannot be exploited for avoidance purposes.

The change made by clause 106 and schedule 19 will make it clear on the face of the legislation that partial relief is available. The relief will apply where a charity purchases UK land or property jointly, as tenants in common, with the non-charity purchaser. The amount of relief that the charity can claim will be based on the percentage that share the charity holds in the property or the percentage of the purchase price paid by the charity for its share in the property, whichever is lower. We estimate that as a result of the change, fewer than 100 charities a year will be able to claim partial relief from SDLT where relief would not have been available previously. The change is expected to have a negligible Exchequer impact.

On the question of how many have claimed the value, given the context I have just set out, it is not likely to be a significant number, but I am happy to write to the hon. Lady with an answer to her questions on that issue. As for whether there has been exploitation before now, we are not aware of any exploitation of the relief as a result of the judgment, but obviously we would want to address the potential for that at the earliest opportunity.

To conclude, this measure provides certainty for taxpayers on the availability of partial relief and the amount of relief that can be claimed. I therefore commend the clause and schedule to the Committee.

Question put and agreed to.

Clause 106 accordingly ordered to stand part of the Bill.

Schedule 19 agreed to.