Business rates bill for charities could increase by £43m

According to government estimates, the bill could go from £348m in 2016/17 to £391m in 2017/18

Charities face huge rates increase
Charities face huge rates increase

Charities in England face an increase of more than £43m in the amount they pay in business rates in the next financial year, new government estimates show.

Charities receive mandatory business rate relief of 80 per cent, with a further discretionary rate relief of 20 per cent depending on the decision of the relevant local authority.

The government has recently revaluated business rates in England, and the new rates will come into effect on 1 April 2017. The financial year 2017/18 will be the first under the new rates.

According to a release from the Department for Communities and Local Government, the total amount charities receive in mandatory business rate relief will amount to almost £1.58bn in 2016/17, rising to about £1.77bn in 2017/18. Mandatory rate relief totalled £1.56bn in 2015/16.

But the DCLG’s figures show the majority of charities will continue not to get discretionary rate relief, with charities getting £44m worth of relief in 2015/16, £46m in 2016/17 and an estimated £51m in 2017/18.

This means that English charities can expect to see a business rates bill of £348m in the 2016/17 financial year, rising to £391m in 2017/18.

In comparison, charities had a business rates bill of £346m in 2015/16.

These increases come at a time when a number of local councils are considering scrapping their discretionary relief for local charities.

In one example, Medway Council in Kent voted to end its policy of offering 100 per cent rate relief to all charities in the area, with some types of charities losing all of their discretionary rate relief.

Andrew O’Brien, head of policy and engagement at the Charity Finance Group, said: "The charity sector is now paying more than £390m a year in business rates, which must firmly dispel the myth that charities are "tax-free". This is an issue that is only likely to grow as councils struggle to find the funding to pay for essential services and have less income to give in discretionary reliefs.

"Yet these are the councils that most need the charity sector to support communities and deliver preventive services. The government needs to avoid this trap by reforming business rates so that they are centrally funded, and increase the level of relief so that charities are able to focus more of their resources on the front line."

Robin Osterley, chief executive of the Charity Retail Association, said: "We are alarmed that the charity sector is facing a business rates bill of £390m next year. This will undoubtedly have an impact on the ability of charities to deliver on their aims and social purpose.

"Relief on charity shops is only a small part of the annual business rates relief bill – about 5 per cent at the last estimate – but an increase in business rates will still have a profound impact on the ability of our shops to trade and raise money for good causes."

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