Welsh charitable rates relief under scrutiny

Another decade, yet another consultation on business rates.

As you may be aware all schools and hospitals, public and private, fall within the non‑domestic rates system, as do most other non-domestic properties. But within this group, some schools and hospitals receive charitable relief if they meet specific criteria.

Under the Local Government Finance Act 1988, a property is eligible for charitable relief if it is owned or occupied by a charity, i.e.. an organisation established for charitable purposes, and the property is ‘wholly or mainly used for charitable purposes’ as defined by the Charities Act 2011.

A ‘charitable purpose’ has to fall within section 3(1) of the Charities Act 2011 and which is for the public benefit. ‘The advancement of education’ and ‘the advancement of health or the saving of lives’ are classed as such and it’s on this basis schools and hospitals may be eligible for charitable relief.

Mandatory charitable relief is currently set at 80% of the total non-domestic rates liability, with local authorities having powers to provide discretionary relief to top up the remaining 20%, in part or whole.

Currently in Wales, charitable relief accounts for over £60m of the Welsh Government support provided to help organisations with their business rates. This accounts for almost 25% of all relief that is currently provided to ratepayers by the Welsh Government.

Independent and private schools currently receive £1.4 million of charitable relief, while maintained and public sector schools receive £3.3 million.  For hospitals, private hospitals receive £540,000 of relief, compared to public sector hospitals receiving £100,000.

The smaller proportion of public sector properties receiving the relief compared to the private sector is largely due to the flexibility and adaptability of private institutions to determine how they are structured. This, in turn, increases their ability to meet the criteria to be classified as a charity.

The consultation is asking for views on whether there needs to be a reform on the charitable rates relief system for schools and hospitals. Questions asked centre around whether the current rates relief schemes are targeted in a fair and consistent manner.

This review is specifically focused on charitable relief for schools and hospitals but there may also be opportunities to express views on other approaches which might help more effective charitable relief targeting.

As well as exploring the fairness of the current system, the review is also asking about the potential effects of making any changes to the charitable relief provided and any particular exemptions if the Welsh Government were to change current eligibility rules.

Anyone interested in taking part can find a copy of the consultation documents and the response form here:https://gov.wales/charitable-rates-relief-schools-and-hospitals-wales

Comments can be submitted up to 24 April 2020 via an online form. Email: LGF1Consultations@gov.wales or Post to the Non-Domestics Rates’ Policy Branch.

Overall, there are approximately 120,000 non-domestic properties in Wales, contributing around £1 billion in revenue each year.