In Helena Partnership Ltd v Commissioners for HMRC  EWCA Civ 569, the Court of Appeal held that a housing association was not carrying out charitable purposes by providing social housing. In this post, Andrew Arden QC and Justin Bates of Arden Chambers outline their criticisms of the decision.
The Preamble to the Statute of Charitable Uses Act 1601 contained a list of the purposes and activities that were then regarded as charitable. Even though the Act has been repealed and replaced, modern charitable law is still based on the Preamble. In Income Tax Special Purpose Commissioners v Pemsel  AC 531, likewise still applicable, the House of Lords held that the activities in the Preamble could be divided into four categories: (i) the relief of poverty; (ii) the advancement of education; (iii) the advancement of religion; and, (iv) other purposes beneficial to the community.
Helena is a housing association which was formed to take a stock transfer from a local authority. The issue in the case was whether it was a charity between October 2001 and November 2004 (at which time it had changed its objects. The new objects were not considered). Its then objects included the provision of housing (cl 4(1)) and ‘any other object that can be carried out by a company registered as a social landlord with the Housing Corporation for the benefit of the community.’ (cl 4(5)).
The Inland Revenue decided that these objects did not fall within any of the four categories identified in Pemsel and that Helena was therefore liable for £6 million in corporation tax to which it would not be liable were it a charity. Helena contended that they fell within the fourth category (ie other purposes beneficial to the community). It was unsuccessful in both the First Tier Tribunal and the Upper Tribunal.
An appeal to the Court of Appeal was dismissed. The provision of housing accommodation was not in itself a purpose beneficial to the community; it was only charitable if it was provided to those with some form of charitable need (eg the poor or elderly). Furthermore, to be charitable under this head, the degree of individual benefit had to be subordinate to the public benefit, which the provision of housing was not. Nor was the association limited to carrying out only charitable activities, having regard to the range of activities permitted to social landlords.
Leaving aside the legal arguments, the history of the housing association movement is deeply rooted in charity: see books like Gauldie, Cruel Habitations, A History of Working-Class Housing 1780-1918 (George Allen & Unwin, 1974), Wohl, The Eternal Slum Housing and Social Policy in Victorian London (Edward Arnold, 1977), Mullins & Murie, Housing Policy in the UK, (Palgrave, 2006). For example, in 1862, George Peabody established what we now know as the Peabody Trust to ‘ameliorate the condition of the poor and needy’. In 1863, the Improved Industrial Dwellings Company was formed to provide rented accommodation to the working poor, funded by shareholders who were prepared to accept below-market dividends, regarded as both philanthropic and charitable. Likewise, Octavia Hill is rightly regarded as one of the pioneers of social housing, and her philanthropic activities led directly to the foundation of a number of housing charities; again, the distinction was barely maintained. It is both surprising and disappointing that there is no discussion at all of this wider historical context in the Helena case.
Relief of poverty?
It is also surprising that there was no attempt to argue that the provision of social housing was charitable within the first head in Pemsel, ie, the relief of poverty. Poverty is, of course, a relative concept and it is not impossible to say that providing secure, high quality housing for those who cannot otherwise afford to buy or rent in the private sector is the relief of poverty, at least of “housing poverty”. Indeed, the Charity Commission has indicated:
‘As a general guide, a person may be regarded as ‘poor’ or in ‘necessitous circumstances’ in the housing context if they cannot afford from all their resources either the purchase price or the market rental of accommodation that would provide a modest and decent standard of living.’ (Affordable Home Ownership, available here)
Finally, we cannot help observing that, while the supply of public housing is not regarded as charitable under any heading of Pemsel, public (ie fee paying, essentially private) schools are: Independent Schools Council v Charity Commission; Attorney-General v Charity Commission  UKUT 421 (TCC). In that case, the Upper Tribunal held that the provision of education in those schools was for the public benefit and that, on the facts, the benefit was not displaced by the charging of fees. Nor, presumably, was it displaced by the individual benefit derived from it, which every relevant study suggests is a lifelong access to the best and most remunerative professions and jobs. (The tests are slightly different between the Pemsel heads, but not, we think, meaningfully in relation to this proposition).