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Business rates for Charities: 100% mandatory relief?

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On 12 June 2015 in a response to a government consultation on reforms to business rates, the Charity Tax Group (CTG), Charity Finance Group, Institute of Fundraising and National Council for Voluntary Organisations recommended that charities receive 100% mandatory business rates relief.

Charitable organisations occupying premises wholly or mainly for charitable purposes are entitled to relief from business rates.  Currently, charities are automatically eligible for mandatory 80% relief on business rates, and local authorities may award up to a further 20% discretionary relief.

There is relatively little guidance on how local authorities should award the 20% discretionary relief, the most recent having been issued by the Office of the Deputy Prime Minister in December 2002.  Perhaps as a result, local authorities are far from unified in their approach to granting this.  Not only do policies implemented by each authority in relation to the relief differ, but so does their application of these policies to the facts.  A further factor may be financial pressure: many have considered withdrawing the discretionary portion entirely, and others place an annual cap on the amount of discretionary relief awarded.

The current system is unfair, penalising as it does some charities for having their business in areas which do not apply discretionary rates relief very generously.  A 100% mandatory relief would eliminate this inequality, and bolster what the CTG points out is financially the most important relief for charities.

Although the introduction of a 100% mandatory relief is potentially unlikely given cuts to public spending, charities should be aware of the consultation and watch out for possible future changes to how the reliefs are applied.

*The window for providing feedback on the government discussion paper is now closed, and a report will be published by the government by Budget 2016.

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