VII.1.1 In June 2008 joint guidance on the Charitable Status and Tax implications for Affordable Home Ownership was issued by HM Revenue & Customs (HMRC), the Charity Commission and the Housing Corporation. The full guidance can be found on the Charity Commission website (Opens new window).
It gives charity trustees, including the boards of Registered Social Landlords (RSLs), general information and advice on the corporation tax consequences of providing charitable shared-ownership housing.
VII.2.1 Trustees must be aware of the differences between trading that promotes their charitable purposes (charitable trading), for example providing low cost homes for their charity’s beneficiaries, and trading, such as selling homes on the open market, which does not further a charitable purpose and creates a tax liability (non charitable trading).
VII.2.2 Trustees of charitable RSLs have a responsibility to:
VII.3.1 Before undertaking any housing development, RSLs need to be as certain as possible about whether sales are likely to be treated as charitable or non charitable trading. For smaller and more straightforward developments, this should be obvious. But HMRC recognises that some social housing developments are big, financially complex, or take a long time to come to fruition, for example because of land assembly or planning discussions.
VII.3.2 In these exceptional cases, RSLs may want reassurance about the likely tax position, either at an early stage or if the scope of the development changes, to help inform their decisions. HMRC form CAR1 should be used to request advice on the application of sections 478 and 479 Corporation Tax Act 2010 that is, on whether the sales constitute taxable non charitable trading.
VII.3.3 This clearance process is not intended to apply to every scheme, but provides certainty in those few cases where there is serious doubt whether an intended activity is charitable.
VII.3.4 Any advice given in response to these requests is governed by HMRC’s guidance on Clearances and Approvals CAP1.
VII.3.5 This is a formal clearance process and you can rely on the advice of HMRC provided that the application for advice sets out all the relevant facts and draws attention to all the relevant issues. ‘Relevance’ should be taken to include any transactions related to, or consequent on, the transaction in question.