The charity sector is facing a business rate bill of just under £350m in the current financial year, rising to just over £390m next year, according to figures released today by the Department for Communities and Local Government.
Charities receive an 80 per cent mandatory relief on business rates on property occupied for charitable activity, and local authorities can apply a discretionary 20 per cent relief. However most choose not to do so.
Business rate relief is the most valuable tax relief charities receive – considerably higher than Gift Aid, which is valued at £1.3bn.
The DCLG figures show that charities are expected to see rapid rises in the level of mandatory business rate relief they receive – up from £1.58bn this year to £1.77bn in the financial year beginning in April.
However discretionary relief stands at just £46m this year and is predicted to rise to just £51m next year – only around a ninth of the potential rebate – leaving the sector with a significant tax bill.
The growth may be linked to a government decision to revalue business rates across the UK, which have changed the landscape for many organisations.
Business rates are the third largest tax the charity sector pays, after VAT, which is valued at around £1.5bn, and National Insurance, which is valued at over £2bn, according to figures collected by the Charity Tax Group. The CTG has previously estimated that charities pay around 6 per cent of their income in tax.