Tag Archives: charity business rates relief

Charity rates relief – is this under threat?

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This week saw the Conservative Party Conference take place in Manchester. During his speech, George Osborne announced that local councils will keep all proceeds raised from business rates (and the local government grant back to councils will be phased out), calling it the “biggest transfer of power to our local government in living memory”.

Now politicians usually make the news with what they say – but when reading about the plan for business rates proceeds, I was struck by something that the Chancellor didn’t say.

Charities currently enjoy 80% mandatory relief on business rates – granted by central government. Relief on the remaining 20% is granted at the discretion of the local council. George Osborne made no mention in his speech as to whether the 80% mandatory relief will remain. This could be taken to mean that the relief is staying – no news being good news.

But is this good news? If councils are able to retain all proceeds from business rates, then they may be less incentivised to grant the additional 20% discretionary relief. This could potentially give rise to additional liabilities on charities and put additional strains on their resources in having to fund rates previously waived.

If councils are to enjoy the benefits of the proceeds from business rates, then they are also effectively suffering the cost of providing the relief. Since 2013 councils have been able to keep 50% of the proceeds from business rates and there are tales of councils seemingly becoming more interested in reviewing property tenants and whether a charity occupies the premises or a trading subsidiary. This may suggest that they are looking to maximise rates proceeds, and minimise the amount of relief given.

At this stage, perhaps it’s not so much ‘’no news is good news’’ as it is ‘‘no news is not bad news’’. However, with rates relief worth an estimated £1.69billion to charities, this is a relief to the sector that is worth fighting for, and that the sector will fight for. Something to keep an eye on….

Taxes and Reliefs Affecting Charities – Part 2

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In the second part of my mini-series on taxes and reliefs affecting charities, I identify and discuss a further 5 areas where charities may be affected by UK tax legislation, including business rates relief.

1 Inheritance Tax
Reliefs are available to individuals leaving at least 10% of their estate to charity, with the estate attracting a lower inheritance tax rate.

Transfers of property to a charity are generally exempt from inheritance tax, as long as the property is held for charitable purposes.

2 Gifts of Land and Shares
Gifting certain assets such as land, UK listed shares, and some other investments to charity can generate income and capital gains tax reliefs for the donor, subject to certain criteria and anti-avoidance provisions.

These reliefs are available to the donor – the charity benefits from receiving the assets.

3 Stamp Duty Land Tax
Charities are generally exempt from paying stamp duty land tax (SDLT) where the property is used directly for charitable purposes, or indirectly by generating investment income to fund its activities.

There are conditions that may require repayment of the relief, for example if there are changes in circumstances of the charity and/or the use of the property.

4 Business Rates Relief
Charities occupying commercial property used for charitable activities are entitled to 80% relief against the full business rates – and local authorities can waive the other 20% if they wish.

However, this relief is not usually available if the property is held or occupied by a charity’s trading subsidiary since this carries out non-charitable activities.

5 VAT
VAT affects a charity in several ways, such as whether a charity is required to charge VAT on any services it provides, whether it is able to reclaim any VAT it has suffered, or whether it is entitled to relief on the goods and services it buys.

Even if a charity is not considered to be trading, it may be carrying out a business activity that requires it to register for VAT, such as charging admission to view property, selling advertising space or sponsorship in return for providing the donor with a benefit, and hiring out property.

If undertaking fundraising events, a charity may not need to charge VAT on income from the sale of tickets if the events are clearly organised and promoted with the aim of generating funds for the charity and its charitable activities.

Charities may carry out certain activities that are zero-rated – this requires them to register for VAT, but allows them to recover the VAT paid in relation to these activities without charging VAT on its supplies. Such activities include sale or hire of goods donated to the charity.

If a charity does carry out a business activity that requires it to register for VAT, then it can reclaim VAT incurred in connection with this business activity.

Charities are also entitled to various VAT reliefs on expenditure not available to individuals or businesses. Currently, these include a reduced rate of VAT charged on fuel, power, and certain energy saving materials used in a charitable building, and zero-rated supplies including advertising, certain medicinal products, and selected goods used in connection with collecting donations.

Conclusion
UK tax legislation can be a minefield, and it is now more important than ever that organisations are aware of their responsibilities. However, there can be generous allowances and reliefs available – so please do get in contact if I can assist your organisation take advantage of these whilst fulfilling your compliance requirements.