Memorandum by the Association of Charity
Shops (SBR 5)
INTRODUCTION
1. The Association of Charity Shops welcomes
this opportunity to contribute to the debate about non-domestic
rating. The Association of Charity Shops is a member organisation
which represents, supports and acts for charities which operate
charity shops. At March 2007, the Association had around 270 member
charities, ranging from the very largest national charities to
local hospice charities. Together, they operate 6,800 charity
shops across the UK. In 2006, charity shops raised £110 million
for vital charitable causes. Over 91% of charity shops' income
derives from the sale of donated, second hand goods.
2. Charity shops receive mandatory 80% relief
from National Non-Domestic Rates (NNDR), because they serve a
"charitable purpose". This is funded centrally. In England,
charity shops serve a "charitable purpose" by virtue
of Section 64(10) of the Local Government Finance Act 1988. Section
64(10) reads:
"A hereditament shall be treated as wholly
or mainly used for charitable purposes at any time if at the time
it is wholly or mainly used for the sale of goods donated to a
charity and the proceeds of sale of the goods (after any deduction
of expenses) are applied for the purposes of a charity".
3. Additional relief is payable at the discretion
of individual local authorities.
CONSIDERATION
4. Taxing charities is an inappropriate
way of raising local authority revenue, in view of the role charities
play in providing services and support to their beneficiaries,
both locally and nationally. Some years ago, we estimated that
NNDR liabilities represented over 25% of charity shops' profits.
This proportion, if anything, will have increased over recent
years.
5. By their nature, charity shops cannot
readily make efficiency gains or other cost reductions. Any increase
in core costs such as NNDR will, therefore, have to be met directly
from funds earmarked for charitable purposes.
6. For these reasons, we would oppose any
proposal for a supplementary business rate, if this rate were
to apply to charity shops. We do, however, recognise that other
considerations might make a case for the introduction of a supplementary
rate appear compelling.
7. The Association welcomed Phil Woolas'
initial response to the Lyons report on local government on 21
March, in which he said, "we have no plans to change the
existing [rates] relief given to charities".
8. In the light of this, should a supplementary
business rate be allowed, we believe that this rate should include
the same reliefs for charity shops as NNDR (both mandatory and
discretionary), and we would urge the Committee to support this.
Annex 1
CANCER RESEARCH
UK
In 2006-07, Cancer Research UK's shops raised
over £17 million to help support our vital research into
cancer, generating a steady income and also a focal point for
the charity on around 600 high streets across the UK. As one of
one of the top two largest charity retailers in the UK, we have
a loyal supporter base with over 16,000 dedicated volunteers working
in shops in their local communities. As such, our retail network
is a key part of our presence in the community with a crucial
role in both raising funds and awareness to support our vision.
We have noted the recommendations of the Lyons
report into local government and the recent proposal that local
authorities should be allowed to levy a supplement to the national
business rate.
As the largest fundraising charity in the UK,
Cancer Research UK believes that any increase in business rate
liability on charity retailers will have significant negative
impact on our ability to raise funds and awareness for our work.
Based on our initial estimation, the introduction
of the new supplement would cost the charity in excess of £500,000
each year.
In addition to the financial costs incurred,
this increase would compromise the unique scale of customer and
supporter touch-points our shop network provides. This affects
our mobilisation of, and engagement with, the general public on
a personal level in key health campaigns and cancer prevention
issues.
We strongly urge, if a supplementary rate is
allowed, that the 80% non-domestic mandatory relief currently
available to charity retailers should be extended to apply to
the new rate.
Charity shops are the lifeblood of the UK's
voluntary sector. Over 7,000 charity retailers are currently operating
in the UK with more than 120,000 volunteers contributing to community
life and the environment—working in partnership with local
councils, businesses, schools, suppliers and other charitable
organisations on waste disposal and recycling initiatives, or
promoting education and training opportunities through in-store
volunteering.
In this way, they rely on the generosity of
these communities, but also contribute to helping to build stronger
and sustainable communities.
As a consequence of the recent cut in standard
rate of income tax, the amount charities can reclaim in gift aid
will result in a total loss of over £70m to the sector in
2007-08. We are concerned that these gift aid losses combined
with any new increase in business rate liability for the sector
will result in severe restrictions to the role that we can play
in enhancing community life. This raises key questions for us
about level of commitment shown by the government to the sector
and its support for encouraging participation in voluntary activity
and charitable giving.
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