Land and Property for Charities
There are many examples of major donors giving land or buildings, either in their entirety or a proportion of the holding, to charity. There is potential for a generous tax relief available for those who donate in this way.
What are the benefits?
Donations of land and property may be a valuable new source of untapped income for your charity. Thanks to the generous tax relief it can be very attractive to donors. Individuals who donate land or buildings to charity benefit from Income Tax relief and exemption from Capital Gains Tax, much the same as Gifts of Shares.
You may choose to sell the property or rent it out, however these gifts may be a way of acquiring land or buildings that can be used in your charitable activities. Before deciding what to do with the gift, you should consider the tax implications for your charity and get professional advice.
How does the tax relief work?
The relief works in the same way as Gifts of Shares. Tax relief is given to donors for the market value of the property at the time of donation. The relief is given as a deduction from the donor's income tax liability for the tax year when the gift is made. The income tax relief is in addition to exemption from Capital Gains Tax. The market value of a property is what it would fetch if sold. The amount that can be deducted is:
- The market value of the property; plus
- Any associated costs of transferring the property, such as solicitor's fees; less
- any proceeds of the sale, or the value of any benefits received in consequence of making the gift
A donor decides to give a house, valued at £100,000 to a charity. The transfer is arranged and Simon pays the costs. He receives tickets for a charity ball, worth £500, as a ‘thank you’ from the charity. The tax deduction is calculated as follows:
Market value of the property £100,000
Plus the costs of transfer £3,000
Less benefit received from charity £500
Deduction against income £102,500
Tax relief £41,000
(Assuming the donor is paying Income Tax at the 40% rate, his income tax bill will be reduced by (£102,000@40%) £41,000)
Does this apply to any gift of Land or Property?
Yes – any land or buildings are eligible for this relief as long as the whole of the donor’s interest in the property is given to charity. i.e. a donor cannot give their house to charity and continue to live in it, as they would be retaining an interest in the property.
Although gifts of property to charity are quite rare, they will be of significant value to your charity, so it is worth highlighting this to donors as another way that they can support your organisation. This may be especially interesting for donors who are cash-poor but asset-rich.