What does it mean for a charity to hold property for qualifying charitable purposes under LBTT?

Under Schedule 13 paragraph 3 of the Land and Buildings Transaction Tax (Scotland) Act 2013, a charity holds property for qualifying charitable purposes if it uses the property directly to further its own or another charity's charitable purposes, or holds it as an investment where profits are applied to the buyer charity's own charitable objectives.

Can a charity claim LBTT relief if it holds property as an investment?

Yes, a charity can satisfy the qualifying charitable purposes test by holding property as an investment. However, the profits generated from that investment, such as rental income, must be applied to the buyer charity's own charitable purposes. It is not sufficient for the investment profits to be directed to another charity's purposes.

Does the property need to be used for the buyer charity's own purposes to qualify?

Not necessarily. If the property is used directly for charitable purposes, it can further either the buyer charity's own purposes or those of another charity. For example, a charity may acquire property and allow another charity to use it for that charity's work, such as operating a food bank.

What are the two permitted uses of property for LBTT charitable relief?

The two permitted uses are direct charitable use and investment use. Direct charitable use means the charity uses the property to further its own or another charity's charitable purposes. Investment use means the charity holds the property to generate income, with all profits applied to the buyer charity's own charitable purposes.

Land and Buildings Transaction Tax (Scotland) Act 2013 Schedule 13 paragraph 3

Holding property for qualifying charitable purposes

Schedule 13 paragraph 3 defines what it means for a charity (as buyer) to hold the subject-matter of a transaction for qualifying charitable purposes.

A charity buyer must hold the property for qualifying charitable purposes to benefit from charitable relief from LBTT.
The property qualifies if the charity uses it to further its own charitable purposes or those of another charity.
The property also qualifies if the charity holds it as an investment, provided the profits from that investment are applied to the charity's own charitable purposes.
There are therefore two permitted uses: direct charitable use or investment use where profits serve the charity's charitable objectives.

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