PP 2013/120

Charities that purchase land jointly with buyers who are not charities are entitled to relief from stamp duty land tax Stamp duty land tax is a tax on land transactions. However, charities that acquire property for charitable purposes, or as investments, are entitled to relief from the tax that would otherwise be payable on the purchase price. The relief is also available if a non-charity buys property as a bare trustee for a charity – but is it possible for a charity to obtain relief if it purchases property jointly with other buyers who are not charities?  Pollen Estate Trustee Co Ltd v HMRC [2013] EWCA Civ 753; [2013] PLSCS 146 confirms that it is, even though this was not the case under the old stamp duty regime. The Court of Appeal asked what policy reason there might be for denying relief to a charity to the extent of its beneficial interest where it participates in a purchase with non-charities. It noted that stamp duty land tax is an entirely new tax, which has shed all the intellectual and other baggage of the old tax, and ruled that the fact that an anomaly existed under the previous regime did not provide a reason for replicating that anomaly under the stamp duty land tax regime. HMRC tried to persuade the court that its decision could lead to tax avoidance or abuse, especially if the charity’s contribution resulted in the remainder of the purchase falling into a lower tax band. However, the court was not convinced, not least because one of the conditions of the relief is that no one has entered into the transaction to avoid stamp duty land tax.  Consequently, there were no policy reasons that would have caused parliament to prohibit charities from claiming exemption where they purchase property jointly with buyers who are not charities. The court observed that joint ownership of interests in land has often presented the courts with problems that legislative draftsmen did not foresee. It noted that the modern approach to statutory construction is to have regard to the purpose of a particular provision and to interpret its language, in so far as is possible, in a way that best gives effect to that purpose.  Their Lordships agreed that this approach applies as much to a taxing statute as to any other and interpreted the legislation purposively to give effect to what they thought must have been Parliament’s intention as regards the taxation of charities.  This enabled them to hold that a land transaction is exempt from stamp duty land tax to the extent that the purchaser is a charity. On that basis, the transaction was partially exempt to the extent of the charity’s interest in the land. Some may regard the decision as surprising, but it brings the law into line with the rules that apply where a charity acquires an existing beneficial interest in land as an investment, intending to apply the profits for its charitable purposes. The Court of Appeal noted that charities need not pay stamp duty land tax in such circumstances, even if their co-owners are not charities, because the only chargeable interest acquired is the beneficial interest itself – and ruled that it would be capricious to deny charities relief simply because they participate in purchases with buyers who are not charities. Allyson Colby is a property law consultant