The Charity Commission is investigating whether the practice of hard-up retailers reducing their business rates liabilities by paying charities to sign tenancies for empty shops, is a matter of regulatory concern.
The practice, which has been brought to light following an investigation by the Financial Times, allegedly sees charities getting donations in return for signing tenancy agreements on hard-to-let shops.
The Financial Times reports that for the owners of empty shops, the donations are a cheaper alternative than paying for the business rates that would be due on empty properties under government legislation brought in this April.
A spokesman for the Department for Communities and Local Government told the FT that this is a form of tax evasion: “Business-rate discounts for charities are well-established and reflect the wider public benefit that charities provide to society. But councils should take firm steps to investigate and stop tax evasion by bodies exploiting these tax breaks.”
The FT named two retailers who confirmed they had made donations to charities in return for them occupying empty shops but did not name any charities.
The Charity Commission said it would be determining whether charity trustees were making the right decision if they occupy a property for payment.
"The Charity Commission has been made aware of registered charities claiming that they occupy empty commercial premises and then claiming business rates relief from local authorities," said a spokeswoman. "In some cases landlords or property companies are approaching charities in order to enter into agreements to occupy premises. The landlord or company benefits through the avoidance of payments of business rates.
"We are currently considering these issues to determine whether there are any regulatory concerns for the Commission.
"As the regulator of charities our concerns, should we have any, will be whether charity trustees are making proper decisions to occupy property to further their charitable purposes, and that any benefit to the landlord is incidental to that."
A Charity Retail Association spokeswoman told civilsociety.co.uk it had heard no reports from its members about the practice. But it will consider the matter if the Charity Commission decides to issue guidance.
