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Charities Triumph in Stamp Duty Test Case

University style builidngIn a major boost for charities, the Court of Appeal has cured an anomaly in the law which prevented them from claiming relief from stamp duty in circumstances where they do not acquire the entirety of the beneficial interest in a property. The Court ruled that there was a ‘policy imperative’ that charities should be granted such relief on a percentage basis in line with the proportion of a property that they acquire.

The Court was considering two separate cases that raised identical issues of law. The first concerned a London University college which contributes to the purchase of homes for members of its staff and acquires an interest in the properties proportionate to its contributions. The second concerned a charitable trust which had more than 100 beneficiaries not all of whom were themselves charities.

Stamp duty relief was refused by Her Majesty’s Revenue and Customs (HMRC) on various property transactions on the basis that the charities concerned did not acquire 100 per cent interests in the buildings and land acquired. The charities’ appeal against those decisions was dismissed by the Upper Tribunal (UT).

Allowing the charities’ appeal, the Court noted that the position of charities which acquire only a partial interest in property was anomalous and that there was no convincing justification for denying stamp duty relief in such circumstances. The UT had adopted an unduly literal interpretation of the relieving provisions contained within schedule eight of the Finance Act 2003.

Finding that there was a policy imperative to adopt a purposive construction of the provisions, the Court ruled that property transactions should be treated as partially exempt from stamp duty to the extent of any interest acquired by a charity or charities.