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Welsh charity shops hit by new rate relief proposals

Warren Alexander, CEO of Charity Retail Association
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Welsh charity shops hit by new rate relief proposals

Finance | Tania Mason | 24 Apr 2013

The Charity Retail Association is to call an emergency summit after a government-commissioned review of business rates in Wales recommended a sharp drop in rate relief for charity shops.

Professor Brian Morgan’s review, published today, claims that charity shops are creating “market distortion” on Welsh high streets and enjoy an unfair advantage over other types of businesses.

Prof Morgan questioned whether charities should receive mandatory business rate relief at all, and recommended that the existing 80 per cent charitable relief should be cut to 50 per cent for all charity shops in 2022.

The report also proposed cuts to rate relief for charity shops from next year, based on the rateable value of the units they occupy.

If the review recommendations are accepted by the government, charities will become eligible for 80 per cent rate relief on the first £12,000 of rateable value of all their shops. Relief would then be cut to 50 per cent on the next £24,000 of rateable value.  Those shops with annual rental values exceeding £36,000 – typically those in town centres or larger stores – will not receive any business rate relief on the remaining value.

The proposals will now go out for consultation until 19 June.

CRA: new tax on charity

The Charity Retail Association (CRA) has described the recommendations as a “new tax on Welsh charity” and is planning an emergency summit with its members in Wales to discuss the impact it will have on the sector.

Professor Morgan’s report will be presented to Edwina Hart, the minister for economy, science and transport, and the CRA intends to invite the minister to the summit to hear from charities directly.

It has also called on Prof Morgan to publish the evidence he has assembled to justify the criticisms contained in his review.

'More level playing field'

Prof Morgan’s recommendations come in the wake of an earlier report and consultation, to which 103 responses were received, 86 of which sought to retain or improve the current relief provisions for charities.

Yet despite the responses being weighted in favour of charities, Prof Morgan concluded in his latest review: “In our opinion the 80 per cent mandatory relief for charity shops is creating problems for small independent retailers in some of our town centres.

“Having looked in detail at the evidence and, notwithstanding the important contribution that registered charities make to the wellbeing of our communities, we recommend therefore that changes are made to the mandatory relief scheme in order to create a more level playing field in our town centres.”

Sector responds with dismay

Warren Alexander, CEO of the CRA, said he was dismayed that Prof Morgan’s final report has gone even further than expected in restricting charity shops in Wales. “High-street decline has been happening for many years, mainly because of the huge rise in internet retailing and out-of-town shopping centres – not because of charity shops,” Alexander said.

“If adopted, these recommendations will constitute a new tax on charity by the Welsh government. Charity shops receive a relatively small business rate relief subsidy…an estimated £3.4m compared with £75m for small businesses.”

Bubb: 'state-sponsored lunacy'

Acevo CEO Sir Stephen Bubb described the recommendations as “state-sponsored lunacy”.

He added:  “The proposal to hit those charity shops with more tax will mean less money for good causes, and fewer employment opportunities for people in Wales. The Welsh government must see sense and drop this proposal.”

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