A report from a committee of MPs into the future of the retail sector has urged government to tighten up the definition of a charity shop, in response to complaints from other types of shops about charities’ business rates relief.
The report, published today by the Business, Innovation and Skills Committee, says that the current system of business rates is not fit for purpose and needs to be fundamentally reformed.
This presents yet another threat to the 80 per cent mandatory relief and 20 per cent discretionary relief that charities enjoy. This benefit has come under growing pressure in recent months, particularly from private sector retailers who feel that high street charity shops have an unfair advantage because of the relief.
The Committee’s report, titled The Retail Sector, acknowledges that charity shops play an important role on high streets by raising revenue for good causes and providing a community space for shoppers and volunteers.
However, it adds: “Charity shops benefit from 80 per cent relief on business rates, and this blanket reduction has loopholes which can be abused by business purporting to be charities.
“It also has the potential for charities to threaten other shops, especially bookshops, which have to pay the full amount of business rates.” Oxfam had been singled out in evidence given to the Committee for benefiting from “a fantastic range of relief”, despite operating more bookstores than Waterstones.
The Committee concluded: “The government needs to outline tighter definitions on what constitutes a charity shop, and to report on its findings by the autumn of 2014.”
More generally, the Committee called for a wholesale review that goes beyond the administration of business rates to examine whether retail taxes should be based on sales rather than the rateable value of a property; whether retail needs its own system of business taxation; and how frequently revaluations should take place.
The Charity Retail Association did not support the Committee’s recommendation to tighten the definition of charity shops. Chief executive Warren Alexander said: “The definition of a charity shop is very clear in the legislation, which states that you must be a registered charity occupying the premises and using the premises to sell wholly or mainly donated items, with the profit donated back to the charity in order to claim rate relief.
“We would condemn any private businesses which are pretending to be charities and claiming rate relief illegitimately and would support action to better enforcement – however, as this is already illegal activity changing the rules would not make any difference.”
Alexander also rejected the claim that charity shops “threaten” other shops, saying that evidence shows this is not true. “Charity shops do not increase rents and do not prevent small and medium businesses from opening on the high street, in fact charity shops are stabilising the high street in a difficult economic climate,”, he said.
Last month, Calderdale Borough Council in West Yorkshire approved plans to stop discretionary rate relief for national charities which have shops in its area in order to make savings of £50,000. Shortly afterward, the Charity Tax Group issued a Budget submission to the Treasury warning that local authorities are taking an increasingly hard line and are unfairly challenging charities’ mandatory relief.
Last year the Welsh government threatened to cut rates relief for charity shops but put the proposal on hold after a backlash from the local sector.
