New guidance on the charitable status of providing affordable home ownership

(Immediate Release - 24 June 2008)

Affordable Home Ownership - Charitable status and tax published jointly by the Charity Commission, HM Revenue & Customs (HMRC) and the Housing Corporation today explains when providing affordable low cost home ownership (LCHO) may be charitable and the legal and tax implications.

Providing housing can serve various charitable purposes, for example relieving need or serving the needs of those who are elderly or disabled. It can also serve a number of charitable purposes that promote urban or rural regeneration in areas of social and economic deprivation. Providing housing for key workers such as teachers or nurses can also be charitable.

This guidance provides real-life examples of scenarios where the provision of affordable home ownership may - or may not - be charitable. It also explains how to assess charitable need and decide whether individuals or families are suitable to participate in the LCHO scheme. Crucially, the guidance emphasises the need for trustees to be aware of the differences between trading that promotes their charitable purposes (primary purpose trading), and trading that does not (non-primary purpose trading).

Non-primary purpose trading can create a tax liability but such trading can be placed in a trading subsidiary and profits passed up to the charity using corporate Gift Aid to reduce or eliminate any tax. The joint guidance launched today will therefore help trustees make informed decisions on both the planning and implementation of housing developments.

See Affordable Home Ownership – Charitable Status and Tax now available on the Commission’s website

The Charity Commission’s Director of Policy and Effectiveness, Rosie Chapman, said:

“We’ve worked closely with HMRC and the Housing Corporation to produce clear, practical guidance on the charitable status of providing affordable home ownership and the potential tax implications of this activity. I hope that charitable registered social landlords will find our new guidance a valuable tool when considering the most effective way of meeting the housing needs of their beneficiaries.”

Notes to editors:

1. The Charity Commission is the independent regulator for charitable activity in England and Wales. See www.charitycommission.gov.uk for further information or call our contact centre on 0845 300 0218.
2. This new guidance replaces the Housing Corporation’s previous advice on affordable home ownership provision by charitable registered social landlords (RSLs) in circular 29/94, issued in August 1994 following advice from the Commission and the former Department of the Environment, whose housing policy responsibilities have now passed to the Communities and Local Government department. Much has changed since 1994 and this is reflected in the guidance.
3. We are aware that this is a difficult subject and to ensure that the guidance is as helpful as we can make it we have sought and achieved Clear English accreditation for it.

 For further information please contact: Jo Saunders on 020 7674 2528 or contact our Press Office.

 PR 21/08