Is the provision of social housing charitable?
Steeles Law Head of Real Estate Michael Fahy and Trainee Solicitor Laura Tanguay consider the Court of Appeal decision of Helena Partnerships Ltd v HMRC  EWCA Civ 569 regarding the charitable status of housing associations.
Last month, the Court of Appeal unanimously dismissed an appeal by housing association, Helena Partnerships Ltd (“HPL”), against a decision that it was not established for charitable purposes only; the upshot of which being that it did not qualify for a £6 million refund of corporation tax paid on rents received pursuant to the charitable exemption.
In 2001, HPL changed its memorandum and articles so that its objects included activity carried out by a social landlord "for the benefit of the community". Later, in 2004, HPL became a registered charity. The issue on the appeal was whether HPL had been established for charitable purposes only in the period of 2001 to 2004; if held to be a charity, it could claim back a substantial amount of corporation tax paid during this time.
The Court held that HPL’s objects were not exclusively charitable. Providing social housing was not, in itself, enough to establish HPL as a 'charity'. Although it’s activities were said to be carried out 'for the benefit of the community', they were not limited to this as some of the housing stock was rented to private individuals who were not considered to be ‘in need’.
Lloyd LJ went on to say that the provision of housing accommodation, “otherwise than for those in some relevant charitable need”, was not a purpose “within the spirit and intendment” of the preamble to the Statute of Charitable Uses 1601. In order for a housing association to come within the scope of the preamble it was considered that the provision of housing would need to be restricted to the relief of need.
It is not sufficient for an organisation to assert, or for its governing document to state, that its activities or operations are to be undertaken for the benefit of the community. More is required and its purposes must fall within the scope of the preamble to the Statute of Charitable Uses.
If you require advice on any issues raised in this article please contact Michael Fahy on 020 7421 1720 or firstname.lastname@example.org