Further pressure was heaped upon charities’ entitlement to business rates relief this week when the Labour MP for Rochdale published figures detailing the extent to which charitable schools benefit from the tax break.
Charitable relief on property rates has come under fire from several quarters recently, with high street charity shops particularly targeted for receiving reliefs when their struggling commercial rivals have to pay the full amount.
Now Rochdale MP Simon Danckzuk, who takes an active interest in matters concerning the high street in his constituency, has obtained figures from the Valuation Office Agency showing that charitable rate relief had increased by 73 per cent over the last five years. Charities now benefit to the tune of an estimated £1.333bn, up from £770.7m in 2007/08, he claimed.
Danckzuk particularly highlighted the extent to which charitable schools and hospitals benefit from the tax break, revealing that 2,570 independent fee-paying schools “such as Eton” will pay just £33.91m in business rates in the current financial year, saving more than £135m because of the mandatory relief.
He linked these charitable reliefs to the collapse of more than 18,000 independent retailers: “Around 18,000 independent shops went bust last year and high business rate are pushing more over the edge every week,” he said.
“It can’t be right that struggling shops have to subsidise places like Eton College, which has educated generations of aristocracy. Eton saved nearly £370,000 in business rates last year just on its college premises. There has to be a fairer criteria for awarding rate relief, because this is an insult to small businesses.”
Danckzuk also singled out Nuffield Health, which he said received an estimated £8m in rate relief in the last financial year, despite earning an income of £645m.
Danckzuk’s comments come hot on the heels of a consultation by the Welsh government on proposals to reduce charitable rate relief for high street charity shops, on the basis that the relief is unfair to other types of retailer.
Charities have also been hauled before the courts and Charity Commission recently for claiming discretionary reliefs on leased properties where the charitable use of the premises is in doubt.
CFG to analyse English position
The mounting pressure has prompted CFG to investigate ways of protecting the tax relief for charities – including trying to determine whether the Westminster government might follow the same direction of travel as its Welsh counterpart.
CFG’s head of policy Jane Tully said: “Without the 80 per cent relief many charities would find occupying their current premises unaffordable.
“The increased scrutiny and negative coverage of business rate relief for charities signifies a worrying direction of travel. While we appreciate that there are local funding pressures and businesses are also suffering as a result of poor economic conditions, cracking down on charity reliefs will simply cause significant detriment to the voluntary sector and those it supports - without addressing what is a much more complex problem.”
CFG plans to publish an analysis of the situation in England within the next few months.
Mandatory rate relief was introduced in 1988 and allows any charity to receive 80 per cent relief on its premises, provided they are used wholly or mainly for charitable purposes.
