CG67516 - Reliefs: charities: Reverter of Sites Act 1987
Under the School Sites Act 1841, land could be conveyed to trustees who would hold the land for the purposes of a school. This would be a charitable trust, but as there would generally be neither income nor chargeable gains, there would be no local office or HMRC Charities file for the trustees. If the land ceased to be used for the purposes of the school, the land would revert to the original donor, or more probably, his or her heirs. Similar provisions provided for the transfer of sites for places of worship and museums. The Reverter of Sites Act 1987 provides that where the closure occurs on or after 17 August 1987 the trustees thereafter hold the property in trust for the persons with the right of reversion.
Unless exceptionally the person with the right of reversion is itself a charity, the closure of the school, place of worship or museum means that the property is no longer held on charitable trusts, and, therefore, there is a deemed disposal and reacquisition of the land (including the buildings) under section 256(2) of the Taxation of Chargeable Gains Act (TCGA) 1992. If, as would normally be the case, it is necessary to value the land at 31 March 1982, the correct basis for valuation is of the property in the state it was in on that date, without any reduction for the possibility of reverter. The Valuation Office should be advised accordingly. The trustees are chargeable on the gain at 18% for the tax years 2008 to 2009 onwards, at the RAT (rate applicable to trusts) for the tax years 1999 to 2000 to 2007 to 2008 and at the basic rate for tax years up to and including 1998 to 1999. Assessments should be made in the appropriate trust District.
If the persons with the right of reverter are immediately identified, then the deemed disposal under section 256(2) TCGA 1992 is followed immediately by another deemed disposal by the trustees under section 71(1) TCGA 1992. This would not give rise to any gain, because the value of the property would be the same. Thereafter the trustees would hold the property as bare trustees within section 60 TCGA 1992. A conveyance of the property to the person with the right of reversion would be ignored, and a sale by the trustees would be treated as a sale by the person with the right of reversion. See CG34300C.
If, however, some or all of the persons with the right of reverter have not been identified, the property continues to be settled property until all the relevant persons have been identified. If the property is sold before then, the disposal is by the trustees and the trustees are chargeable on the gain at 18% for the tax years 2008 to 2009 onwards, at the RAT (rate applicable to trusts) for the tax years 1999 to 2000 to 2007 2008 and at the basic rate for tax years years up to and including 1998 to 1999. Assessments should be made in the appropriate Specialist PT Trusts office. If the relevant persons are identified before the property is sold, there is a deemed disposal under section 71(1) TCGA 1992 at that point.
Extra statutory concession D47 provided relief from Capital Gains Tax and Income Tax in certain circumstances where the property or proceeds went to a charity with a right of reversion which had not been identified at the date of sale or otherwise became held on new charitable trusts because of an order made by the Charity Commissioners or the Secretary of State for Education. Any claim for the benefit of this concession is to be made to Capital Gains Technical Group. The concession is abolished with effect from 1 April 2010. See Technical Note on the Withdrawal of Extra Statutory Concessions, dated April 2009.