Mandatory charitable relief

Charitable relief is mandatory where a charity owns a material interest if the development is to be used wholly or mainly for a charitable purpose of the charity in question or of that charity and another charity (or charities). According to guidelines issued by the Department for Communities & Local Government (DCLG): ‘There is no statutory definition of [the wholly or mainly test]. However the courts have held ‘mainly’ to mean ‘more than half.’’.

If the development is left unoccupied, it is still eligible for charitable relief.

There is no mandatory relief if that part of development to be used for charitable purposes will not be occupied or under the control of a charity, or if the material interest is owned jointly by a charity and a non-charity, or if the relief would constitute a State Aid.

Discretionary charitable relief

Discretionary charitable relief is potentially available (if discretionary charitable relief is available in the local authority area in which the development will be situated) if mandatory charitable relief would have been available apart from the fact that the above State Aid condition is not met. In this case, the local authority may allow charitable relief provided that it does not constitute a State Aid that needs to be notified to and approved by the European Commission.

Another type of discretionary charitable relief – relief for investments – is potentially available if:

• discretionary charitable relief is available in the local authority area in which the development will be situated
• the charity owns a material interest and
• the whole or greater part will be held by a charity (or jointly with another charity or charities) as an investment from which profits applied for charitable purposes (whether of the claimant charity or of that charity and other charitable institutions). In this case, the DCLG guidance states that 51 per cent or more of the monetary value of the development is likely to constitute its greater part.

However, there is no relief for investments if:

• the charity intends to occupy part of the development for ‘ineligible trading activities’ or
• the material interest is owned jointly by a charity and a non-charity or
• if relief would be a notifiable State Aid, which must be approved by the European Commission.

‘Ineligible trading activities’ means trading activities other than the sale of goods donated to the charity, where the profits are applied for the claimant charity’s charitable purposes.

Claiming charitable relief

Following the correct procedure for applying for charitable relief is critical if it is to be obtained successfully. Charitable relief must be claimed in a prescribed form and must be received by the local authority before the development commences. The local authority must notify the claimant in writing of its decision on the claim and the reasons for the decision as soon as practicable and, where the relief is granted, the amount of relief granted. Note that the claim will lapse if the development is commenced before the local authority has notified the charity of its decision on the claim. Also, a commencement notice must be submitted to the local authority before the development commences. Finally, any claim for discretionary charitable relief must be made before the local authority withdraws discretionary charitable relief.

Relief for social housing

There is also a relief for social housing, which is intended to cover certain types of housing use by both charitable and non-charitable developers.