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HMRC internal manual

VAT Construction

‘Relevant charitable purpose’ - interpretation of terms: what 'use by a charity' means?

In order to determine how a building is being used by a charity, all the occupational uses of the building must be looked at. All those uses must amount to a use of the building for a relevant charitable purpose.

Previously we considered leasing or letting a building on commercial terms as ‘using’ the building.

A charity that merely makes a building available to another party (charity or otherwise) for no charge, isn’t using the building.

In League of Friends of Kingston Hospital (VTD 12764), the charity arranged for the construction of a building to house a scanner unit for a hospital. The Tribunal held that since the hospital itself wasn’t a charity, and they were the actual users of the building, the building was not being used for a relative charitable purpose.

In St Dunstan’s Educational Foundation ([1999] STC 381), the charity constructed a sports hall which was to be used by an independent fee-paying school and by the local authority. The Court of Appeal held that by allowing the building to be used by the school, the charity wasn’t ‘using’ the building. The school, which was also a charity, was using it for business purposes since it was a fee-paying school.