LBTT3035 - Charities relief

LBTT guidance on tax relief where the buyer in a land transaction is a charity and certain conditions are met.

This relief is provided by the provisions of schedule 13 to the LBTT(S)A 2013.

Description of relief

Where the buyer in a land transaction is a charity and certain conditions are met, relief from LBTT may be claimed. The relief is available to charitable trusts in the same way that it applies to other forms of charity.

Relief conditions

Both of the qualifying conditions must be met for charities relief to be claimed:

  • the charity or a charitable trust must hold or intend to hold the subject matter of the land transaction (or the greater part of it) for qualifying charitable purposes; and
  • the transaction must not be entered into for the purpose of the buyer or any other person avoiding LBTT.

LBTT(S)A 2013 schedule 13 paragraph 2

What are ‘charitable purposes’?

For the purposes of this relief, ‘charitable purposes’ means:

a. the prevention or relief of poverty;

b. the advancement of education;

c. the advancement of religion;

d. the advancement of health;

e. the saving of lives;

f. the advancement of citizenship or community development;

g. the advancement of the arts, heritage, culture or science;

h. the advancement of public participation in sport;

i. the provision of recreational facilities, or the organisation of recreational activities, with the object of improving the conditions of life for the persons for whom the facilities or activities are primarily intended;

j. the advancement of human rights, conflict resolution or reconciliation;

k. the promotion of religious or racial harmony;

l. the promotion of equality and diversity;

m. the advancement of environmental protection or improvement;

n. the relief of those in need by reason of age, ill-health, disability, financial hardship or other disadvantage;

o. the advancement of animal welfare; or

p. any other purpose that may reasonably be regarded as analogous to any of the preceding purposes.

This definition is the same as that provided in section 7(2) of the Charities and Trustee Investment (Scotland) Act 2005.

What is a charity?

Charities registered in Scotland: Bodies registered in the Scottish Charity Register held by the Office of the Scottish Charity Regulator (OSCR) may claim LBTT charities relief.

Other bodies: Charities relief is also available to bodies which are managed or controlled outside Scotland and whose purposes consist only of one or more of the charitable purposes listed in (a) to (p) above.

Such bodies must be established under law in either the rest of the UK, another EU member State, Norway, Iceland or Liechtenstein. Such a body that is acquiring land or buildings in Scotland may be required to register with OSCR if it has not done so already. Guidance is available from OSCR about whether a body needs to register.

LBTT(S)A 2013 schedule 13 paragraphs 15 to 17

What is a charitable trust?

As noted above, the relief is available to charitable trusts in the same way that it applies to charities. References to charities therefore also refer to charitable trusts. A charitable trust is a trust of which all the beneficiaries are charities or a unit trust scheme in which all the unit holders are charities.

LBTT(S)A 2013 schedule 13 paragraphs 12 to 14

Joint purchases

Where a charity, or charities, purchase land and buildings jointly with one or more parties who are not charities, Charities relief may be claimed for the element relating to the charity, or charities. Partial Charities relief is calculated as follows:

  • Calculate the LBTT on the whole transaction without relief

  • Identify the percentage that is the lower of:

    • The percentage share which the charity holds (or charities hold) in the property, and

    • The percentage of the purchase price paid by the charity (or charities) for its (or their) share in the property

  • Multiply the LBTT calculated at bullet one by the percentage at bullet two to get the Charities relief to be claimed

Charities Relief and Partnerships

Separate arrangements are in place where charities relief applies to the transfer of interest in a partnership that is a chargeable transaction by virtue of Paragraph 17 or Paragraph 32 of LBTT(S)A 2013, Schedule 17.

The transaction will be exempt from charge if the transferee is a charity and the qualifying conditions are met.

The qualifying conditions are:

(a) that every chargeable interest held as partnership property immediately after the transfer must be held for qualifying charitable purposes,

(b)that the transaction has not been entered into for the purpose of avoiding the tax (whether by the transferee or any other person).

A chargeable interest is held for qualifying charitable purposes if it is held:

(a) for use in the furtherance of the charitable purposes of the transferee or of another charity, or

(b) as an investment from which the profits are applied to the charitable purposes of the partners.

Relief is restricted to cases where all of the chargeable interests held by the partnership immediately after the transfer are held for charitable purposes.

Therefore, partial relief is not available where a partnership holds some properties for charitable purposes and some not.

Claiming the relief

To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.

Withdrawal of the relief

Charities relief is withdrawn or partially withdrawn if:

  • a disqualifying event occurs within three years of the effective date of the transaction for which charities relief was claimed (the ‘relevant transaction’); or
  • if the disqualifying event occurs after that 3 year period as a result of an arrangement put in place during that 3 year period, and

at the time the disqualifying event occurs, the charity holds a chargeable interest acquired under the relevant transaction or holds a chargeable interest that is derived from the interest acquired under the relevant transaction.

A disqualifying event is either:

  • the charity ceases to be established for charitable purposes only, or
  • the land, or buildings acquired under the relevant transaction, or any interest or right derived from it, is used or held for purposes other than qualifying charitable purposes.

Where only part of the land or buildings was acquired by the charity for charitable purposes, the following transactions are also considered to be disqualifying events:

  • any transfer by the charity of the whole or any part of the subject matter of the relevant transaction to a party that is not a charity; or
  • any grant by the charity at a premium (i.e. where there is consideration other than rent) of a low-rental lease (i.e. less than £1,000 per year) of the whole or any part of the subject matter of the relevant transaction to a party that is not a charity.

If either of the above applies, the date of the disqualifying event is the effective date of the transfer or grant, and when deciding whether a disqualifying event has taken place, the chargeable interests held by the charity at the time of the disqualifying event are considered. When deciding the amount of relief partially withdrawn, the chargeable interests held by the charity immediately before the disqualifying event are considered.

Where a disqualifying event occurs, the charity must make a further LBTT return to us. The return must identify how much tax is chargeable.

Where relief is withdrawn, the amount of tax chargeable is the amount that would have been chargeable for the transaction but for the relief or, where relief is partially withdrawn, an appropriate proportion of that amount.

The appropriate proportion is calculated having regard to:

  • what was acquired in the relevant transaction and is still held by the charity; and
  • what is being used by the charity for non-charitable purposes.

The LBTT return must be made before the end of 30 days beginning with the day after the day that the event occurred.

LBTT(S)A 2013 schedule 13 paragraphs 4 to 11

Ref ID


Archive Date

Last updated