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The voice of Scotland’s vibrant voluntary sector

Published by Scottish Council for Voluntary Organisations

TFN is published by the Scottish Council for Voluntary Organisations, Mansfield Traquair Centre, 15 Mansfield Place, Edinburgh, EH3 6BB. The Scottish Council for Voluntary Organisations (SCVO) is a Scottish Charitable Incorporated Organisation. Registration number SC003558.

Relief for charities on new tax

This opinion piece is about 9 years old

​Charities won't suffer when Stamp Duty is replace in April

As a registered charity have you been hoping for some cheering news this New Year?

It may not be the most exciting revelation, but it will certainly come as a relief for most registered charities in Scotland to learn you will generally avoid being caught up in changes to tax on property transactions in Scotland.

Here's the technical bit: Land and Buildings Transaction Tax (LBTT) will replace Stamp Duty Land Tax (SDLT) for property transactions in Scotland completing after 1 April 2015 – with many property transactions facing an increase in their tax bills.

Alastair Keatinge
Alastair Keatinge

There are changes in the applicable rates, as compared with SDLT, but the most important point for charities is that Charities Relief will still apply to LBTT – meaning the relevant provisions remain similar. That means that in most circumstances registered charities will not require to pay LBTT on purchases and leases. Phew.

However, in order to qualify for the relief, the buyer must be a charity and certain conditions must be met. The charity is required to hold the property concerned (or most of it) for the furtherance of its charitable purposes, or as an investment from which the profits will be used for the charitable purposes of the buyer.

However, if the buying charity ceases to operate as a charity or if the property is no longer held or used by the buyer for charitable purposes within three years of the effective date of the original transaction, the relief may be withdrawn.

Importantly, the transaction also must not have been entered into to avoid tax.

It is worth checking that the charitable purposes test is met. It will also be necessary to submit a formal tax return within 30 days of a transaction completing to claim the relief and avoid a penalty charge.

Alastair Keatinge is head of charity law at Lindsays. He is one of only two Scottish charity lawyers on a Charity Law Association working party which has looked at proposed changes to the way the Scottish Regulator (OSCR) has operated since 2006. OSCR has been consulting on the changes to its approach to regulation of charities. The working party comprised three English based charity lawyers, an English based academic and two Scottish charity lawyers, one of whom was Alastair Keatinge.