Charities are set to see the amount they pay in business rates double by the end of the decade, according to the Charity Finance Group (CFG). The total charity sector business rates bill is on course to rise from £210m in 2010-11 to £432m a year in 2019-20. This is funding that would otherwise spent on charitable activities.
CFG has written to the Chancellor to raise this issue and ensure that charities are given the same consideration as businesses in the upcoming Budget.
In 2010-11, charities received just over £1bn in mandatory rate relief, and around £10m in discretionary rate relief. This means that charities had an overall ‘business rates bill’ of £210m (the total cost of business rates minus the amount of discretionary rate relief received). According to the latest DCLG data, the cost of business rates will be £1.76bn in 2017-18 and charities will receive around £51m in discretionary rate relief. This means that the total ‘business rates bill’ for charities will have risen to £391m a year.
If the rate of growth in rate relief and discretionary rate relief over the past five year continues at the same pace, by the end of the decade (2019-20) charities will be paying £432m a year in business rates. This would be double the cost at the start of the decade.
This comes at a time when funding is tight in the charity sector, and demand for services is expected to increase. The Managing in the New Normal 2016 (carried out by Institute of Fundraising and CFG alongside PwC), found that 70% of charities expected demand for their services to increase over the past year.
This is despite the fact that there is little public support for charities paying business rates at all. ComRes, commissioned by CFG and Institute of Fundraising, interviewed more than 2,000 British adults online.
It found that only 17% of the public believed that charities should pay business rates, with similar proportions saying they should not pay VAT (15%) and Insurance Premium Tax (11%).
CFG has repeatedly called for the government to consider raising mandatory charitable rate relief from 80% to 100% in the upcoming Budget. This would make the tax fair, cut red tape from every local authority having to develop individual business rates policies for charities and put it on par with other tax reliefs such as Gift Aid which do not change depending on the location of the charity.
It would also eliminate the risk of charities being negatively impacted by business rate evaluations which could see some organisations see significant increases in their business rates.
Commenting on the issue, Andrew O’Brien, Head of Policy and Engagement, Charity Finance Group, said:
“There is a perception amongst the public that charities are tax free. This is simply not the case. Although we do receive support towards paying business rates, there are many charities which are still paying substantial amounts. This, alongside taxes such as IPT and irrecoverable VAT, should be seen as indirect taxes on people’s donations as they mean that there is less money left over to help beneficiaries.
It is time to correct this historically anomaly and create a simpler system which will see charitable resources flowing to where they should go, furthering charitable objectives.”
NOTES TO EDITORS:
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- Please contact Andrew O’Brien (07889129971) for more information
- CFG is the charity that champions best practice in finance management in the voluntary sector. With nearly 1,400 members, managing over £21bn, it is uniquely placed to challenge regulation which threatens the effective use of charity funds. For more information, please see cfg.org.uk
- A copy of the letter to the Chancellor can be found attached to this press release.
- Full data tables can be found here: comresglobal.com
- ComRes interviewed 2,024 GB adults online between the 19th and the 20th October 2016. Data were weighted to be nationally representative of all Great British adults aged 18+ by age, gender, region and socio-economic grade.
- ComRes is a member of the British Polling Council and abides by its rules (www.britishpollingcouncil.org). This commits ComRes to the highest standards of transparency.