CHARITABLE TRUSTS (Hansard, 28 April 2004)

§ Mr. Laws
Hard on the heels of the great triumph of the hon. Member for Hertford and Stortford (Mr. Prisk), I hope to induce the Financial Secretary to make further changes in this important area, but on this occasion I invite her to come up with her own proposals.
The clause extends charities relief to charitable trusts, and relief is available when the charity intends to hold the property acquired either for use in furtherance of its charitable purposes or as an investment. I understand that the Inland Revenue interprets that as denying relief when a property or part of the property acquired is to be sold off by the charity, on the basis that the purchase for resale is not an investment.
943 Furthermore, we understand that when a property is acquired partly for use by the charity for its own purposes and partly to be sold off, the latter part causes relief to be denied on the whole acquisition, on the basis that an acquisition is either entirely chargeable or exempt. Clearly, there are circumstances in which a charity has to acquire a particular site or building in its entirety, but then has to sell on the part that is surplus to requirements. In those circumstances, the apparent current interpretation could produce a capricious result. If there is a delay before resale, that might indicate an investment activity, but it would not be possible to foresee that at the time of the acquisition by the charity. It would seem particularly unfair for the charity to bear the whole 4 per cent. stamp duty land tax on the entire acquisition where only a small part had to be resold.
We understand that the principle underlying the Revenue's interpretation is to deny relief for trading transactions by charities that would enjoy an unfair advantage in competing with commercial organisations. However, I suggest that the condition on which the Government are basing clause 286 should be reversed so that relief would be denied where the main purpose of the acquisition was dealing in property, but it would still be possible to have the relief where the main purpose was investment and a portion of the property was being sold on.
I do not know whether the Financial Secretary can offer us any reassurances on that point now, but at the very least I hope that she might consider it during the course of the Bill, and consider coming back with clarifications or Government amendments.

§ Ruth Kelly
I am grateful to the hon. Gentleman for the way in which he has raised this issue today and for giving me some notice of his point. I hope that I can give him some reassurance, if not the full reassurance that he seeks.
Charities certainly will not lose relief if they dispose of properties. Provided that they have used a property for charitable purposes, its disposal should not cause any clawback of relief. However, the hon. Gentleman is right to point to the fact that relief is not available if a charity acquires property intending to dispose of it—in other words, when it is in effect speculating on the property. I think that he will agree that it would not be right for a charity to be exempt from the tax if it were to engage in pure speculation.
The hon. Gentleman raised the case of a property that is bought and part sold on. That could cause a degree of difficulty, but I should like to think that in practice it is possible to distinguish between the two parts of the transaction, so that one part of it, which is concerned with the charity, benefits from the relief, and the other part is charged to stamp duty. I would be willing to discuss that with him further during the later stages of the Committee, or to discuss it with charitable bodies if they feel that that is not a reasonable solution. However, it strikes me that what I have suggested is probably a fair compromise.

§ Mr. Laws
I understand the Financial Secretary's intention to consider the point. Will she clarify whether amendments to existing legislation are required to achieve the desired effect that duty will be payable only on the part of the property that is sold on? Is that currently her interpretation of the law as it would be if the Bill was passed unamended, or does she believe that it is necessary for us to discuss the matter further and to table amendments to achieve that effect?

§ Ruth Kelly
I understand that that is the current intent of the legislation, but I shall write to the hon. Gentleman to make that point clear. If further amendments are needed, he will of course have an opportunity to put those to the Committee. In the light of that clarification, I hope that he will support the clause.