The question of when stamp duty land tax should be paid runs into problems of definition when mixed-use housing is involved, says Pauline Hudd, stamp duty adviser at KPMG
Because of the way that the new stamp duty land tax rules work for charities, there must be an intention to hold or use the land acquired for qualifying charitable purposes.

The exemption is not available for property purchases where part of the site is going to be used to build homes for market sale as this would be a non-qualifying activity.

This catches a large number of mixed-use sites where the proceeds from the sale of homes on the open market will be used to cross-subsidise the cost of building social housing.

There is no partial relief from SDLT on the acquisition of the site and any intention to sell on part of the site to a developer – or for a subsidiary of the registered social landlord to construct homes for sale – would disqualify the relief on the whole site.

This interpretation has been confirmed by senior policy advisers at the Stamp Office, who take the view that activities that are carried out to raise money for charitable purposes are not the same as using the land or holding the land for charitable purposes.

This would be treated as property dealing, which is not within the scope of SDLT charity relief.

If it is possible to separate the two areas of land, charity relief can be claimed on the part of the site to be used for social housing, with SDLT at 4% payable on the sale land. However, this raises difficulties in identifying the sale sites.

It may be relatively straightforward where there is to be a development of houses, but if the sale properties are flats within a mixed-use block, the separation would be extremely difficult to achieve. To limit the charge, councils would also have to be persuaded to split the site and to transfer part to a non-association – something they have been reluctant to do in the past, even if the developer is a wholly owned subsidiary of a housing association.

The interpretation of the SDLT charity rules will result in a substantial increase in transaction costs on many development projects and will mean that many tried and tested transaction structures are no longer viable.

Source

Housing Today

Postscript

Pauline Hudd was previously head of stamp duty communications for the Inland Revenue