Annex vii: affordable home ownership — charitable status and tax

Updated 27 March 2024

1. Introduction

1.1 In June 2008 guidance on the Charitable Status and Tax implications for Affordable Home Ownership was issued by HMRC, the Charity Commission and the Housing Corporation. Updated guidance for charitable registered social landlords was published in May 2013.

2. Charitable and non-charitable trading

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).

2.2 Trustees of charitable Registered Social Landlords (RSLs) have a responsibility to:

  • identify the non-charitable trading which their charity is carrying out
  • properly apportion income and expenses to it
  • make a return to HMRC under Corporation Tax Self Assessment of any profits arising from non-charitable trading

3. Clearance by HMRC

3.1 Before undertaking any housing development, RSLs need to be certain that their property sales will 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 complete, for example because of land assembly or planning discussions.

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.

3.3 This clearance process is not required for every scheme, but provides certainty in those cases where there may be doubt that an intended activity is charitable.

3.4 Any advice given in response to these requests is governed by HMRC’s guidance on Clearances and Approvals — CAP1.

3.5 This is a formal clearance process and you can rely on the advice of HMRC provided that your written application for advice sets out all the relevant facts and issues. This should include the:

  • total number of dwellings in the development
  • number of dwellings for outright sale
  • number for sale on a shared ownership basis
  • number for social renting

Written clearance requests should be sent to the Charities Technical team at HMRC.