Housing association was not a charity, appeal judges rule

The Court of Appeal has ruled that a housing association cannot reclaim £6m in corporation tax because it was not established for charitable purposes during the period of the claim.

Lord Justice Lloyd said the case raised issues “of some importance and difficulty, some of which have been the subject of debate for years”, in particular whether the promotion of objects of general public utility was a charitable purpose. ?He said Helena Partnerships took over a large part of the council housing stock in St Helens in 2002 in a deal that gave the council the right to nominate tenants to three quarters of the properties.?Delivering the leading judgment in Helena Partnerships v HMRC [2012] EWCA Civ 569, Lloyd LJ said the question was whether, from 2001 to 2004, the housing association was established for charitable purposes only.

“If the answer to that question is that it was not so established, then Helena is liable for £6m of corporation tax on the rents that it received,” he said.

Lloyd LJ said there was no suggestion that the housing association’s housing stock would be allocated only to “persons who would qualify as being in need” for charitable purposes such as relief of the poor, the elderly and infirm.

It was agreed between the parties that some of the council’s housing was let to persons who were (in that charitable sense) in need, but some of it was let to persons not in such need,” he said. ?Lloyd LJ said he would not consider that the provision of housing accommodation, “otherwise than for those in some relevant charitable need”, was a purpose “within the spirit and intendment” of the preamble to the Statute of Charitable Uses 1601.

He said the preamble did include “works of general public utility”, which were the repair of bridges, ports, havens, causeways, churches, sea-banks and highways.

“I do not regard the provision of housing as being analogous with, or within the same spirit as, the list of public works, so as to be charitable in itself,” Lloyd LJ said.

“Given the substantial element of direct benefit for those individuals who occupy the relevant accommodation from time to time, it seems to me that the provision of housing or other accommodation is much more akin to the items listed in the preamble other than the examples of public works, but that, to qualify as analogous to those, it would require to be restricted to the relief of need.”

Lloyd LJ said that even if it was accepted that there was an element of benefit to the community in the pursuit of Helena’s objects, there was also a “substantial element of benefit to individuals”, which could not be regarded as only subordinate to the benefit to the community.

“In its nature, the benefit afforded by the provision of housing to the person who is thereby housed is of an altogether different order, as it seems to me, to the benefit afforded by the construction or maintenance of a road, a bridge or a sea-wall, or the maintenance of a fire brigade or a lifeboat service. ?“The former provides direct benefits to the occupants of the accommodation which far outweigh the degree of indirect benefit that other members of the community may derive from the existence of the housing stock.”

Lloyd LJ held that “the provision of housing accommodation is, and can only be, a charitable purpose if it is justified as charitable in respect of the direct benefit provided”.

He dismissed the housing association’s appeal. Lady Justice Black and Lord Justice Lewison agreed.?Rob Young, chief executive at Helena Partnerships, said the housing association became a registered charity in 2004, but “as our activities had always been charitable”, he hoped that it could claim back a certain amount of tax paid between 2002 and 2004.

“While this wasn’t possible, we would like to stress that we have always paid all taxes due in full and therefore do not owe anything as a result of this ruling – so it’s business as usual,” Young said.?A spokesman for HMRC said the department was considering the judgment in detail and would not be commenting further.