Will Charities be affected by the Business Rate Changes?

Reducing Business Rates

It looks like the charity sector could be hit with yet more changes after the chancellor announced plans for local authorities to keep 100% of the money raised by business rates. On 5 October 2015, George Osborne revealed his devolution plans, which are hoped to “boost local growth, help attract business and create jobs”.

In the UK, all businesses and charities have to pay business rates on non-domestic properties, such as shops and offices, with funds contributing to the local government’s finances. However, over the last ten years, The Business Rate Relief has provided smaller businesses and charities with an 80% mandatory tax relief on their non-domestic properties. In special cases, a discretionary relief (of up to 100%) is granted to those who are in need of extra help; although, this is only available to organisations whose work and services directly benefit the local community. Indeed, the Chancellor’s new proposals do sound promising for poorer constituencies in need of improved services; however, questions have been raised on whether the changes will have a negative impact on smaller businesses, Community Charity Amateur Sports Clubs (CASC’s) and charities who receive a business/charity rate relief. So how do the proposals affect charities? The Business Rate Relief is valued at a total of £26billion and is saving the charity sector £1.69billion. Therefore, if the local councils collecting the money are to take this rate relief away, many charities are expected to struggle and it is predicted that those charities who just about manage to stay in a surplus could face deficits, in the thousands, due to the change.

It is possible that the local councils will make the 80% Business Rate Relief discretionary. However, the concern here is how willing the council will be to provide the relief for charities and businesses. According to the Charity Shops Survey 2015, councils rarely give the discretionary top-up of 100% to charities. Therefore, even if the local councils are not stringent on who gets the Business Rate Relief, the likelihood is that the discretionary ‘top up’ will be scarce or even scrapped. Saying this, the devolution plans will help poorer constitutions to take in more money, and subsequently build up their local communities. However, the biggest concern here is that rich constituencies, will only be getting richer, thus maintaining the inequality of wealth in the UK. The rate relief helps to balance this for charities, especially in those less fortunate areas. Head of policy at the Charity Finance Group stated, “Business rates relief is our biggest tax relief and critical for many organisations who would struggle to deliver services without it. We must make sure that this doesn’t lead to unintended consequences for the sector.”

Currently, Sir Stuart Etherington, Chief Executive of NCVO and Charity Finance Group contacted Osbourne to “urgently clarify his intentions and safeguard this vital relief that enables charities and volunteers to continue their good work”. Discussions on the changes to business rates are currently being made. An update will take place on Wednesday 25 November 2015 with plans to be initiated from early next year. If you would like further information on how this may affect you, please feel free to contact me on suda@raffingers-stuart.co.uk.