A housing association will have to pay at least £6m in corporation tax after judges ruled invalid its claim to have been operating as a charity before it registered with the Charity Commission .
Helena Partnerships, which was a company until it registered with the commission in December 2004, had appealed against a claim by HM Revenue and Customs that it owed £6m in corporation tax incurred between July 2002 and March 2004, plus interest.
St Helens Council in Merseyside transferred some of its housing stock to the organisation in 2002 in a deal that was structured to avoid VAT. In a case heard by the Upper Tribunal in February, the charity argued it was exempt from corporation tax because it had charitable status before it was registered with the commission.
It argued that it qualified as a charity in the period under dispute because it was using any profits it generated for charitable purposes.
The governing documents held by the housing association before it registered as a charity state that it operated "for the benefit of the community" and "shall not trade for profit". The company became a charity in 2004 after amending its objects.
The tribunal ruled that the previous governing documents did not give it charitable objects. Its ruling, published last week, said Helena Partnerships’ overall purpose before 2004 was "the management and provision of housing to tenants for the benefit of the council".
It added that the company’s purposes allowed it to confer private benefit on individual tenants.
The tribunal’s ruling also said Helena Partnerships accepted that it had not attempted to register as a charity in 2002 and "had not complied with the relevant regulatory requirements for charities".
It added: "The appeal is dismissed on the basis that [Helena Partnerships] was not…formed for exclusively charitable purposes."
Helena Partnerships did not respond to calls.