Why Charities fear a business rates avoidance clampdown

Charities are getting involved in the big business rates' debate this week, amid concerns anti-avoidance measures will stifle creativity in their sector.

The Department for Communities and Local Government and the Treasury had sent out a consultation paper which looks at anti-avoidance measures for local authorities. However, four charity umbrella bodies have called on the Government not to go down this route.

The storm in the charities' tea cup could actually have far-reaching implications for many businesses which partner up with good causes to mitigate their rates' bill on empty properties – particularly retail units.

Anyone who works in Rating knows that one of the main rates' mitigation options includes allowing charities to occupy property for their own charitable purposes.

The Consultation asked for views on giving Local Authorities general or more specific anti-avoidance powers that would allow them to withhold reliefs and exemptions if they could "reasonably conclude that the main purpose or one of the main purposes of the ratepayer's occupation or arrangements is to receive the relief or exemption, and/or that the arrangements or occupation is contrived or artificial".

The Charity Finance Group, the Institute of Fundraising, the Charity Retail Association and the National Council for Voluntary Organisations, are firmly against this idea saying that Local Authorities are not in a position to judge independently whether a property is being occupied by a charity mainly for purposes of business rate relief, and the proposals could hinder innovation among charities and case law supports this contention.

It looks like they want to keep the current status quo where any issues are handled independently through the legal system – this is particularly important given recent changes to business rate relief through the business rate retention scheme, which gives local authorities an incentive to challenge and refuse reliefs claimed whether mandatory or discretionary.

They also point out that charities carry out a diverse range of work and strive to find innovative ways to use property in order to meet the needs of their beneficiaries. They conclude their case by saying sweeping anti-avoidance rule would be likely to lead to Local Authorities refusing reliefs reducing innovation in the sector, having a negative impact on communities.

With so many diverse viewpoints thrown into this consultation, it will be interesting to see what the exercise concludes but I do know there was one particularly insightful recommendation that was sent in by, er, yours truly – but you can look forward to that gripping sequel on PlaceNorthWest next week.

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