The government has supported the principle of business rate relief for charities before an expected review, appearing to allay fears that the tax break might be abolished.
In its response to a report looking at the impact of business rates on business, produced by the Treasury Select Committee last year, the Treasury criticised the committee for suggesting the existing system of rates relief showed the business rates system was “broken”.
Charities currently receive an automatic 80 per cent relief on business rates, with an optional further 20 per cent cut available. It is worth about £2bn to the sector every year.
The original recommendation from the committee said that the existing system of rates reliefs was “bureaucratic” and the “number of reliefs that are needed for business rates to work indicate a broken system”. It called for the Treasury to review the current reliefs system.
But in its response, the government rejected the committee’s views and underlined its support for the existing system of tax reliefs.
“The government does not agree that the number of reliefs available under a particular tax can be taken as evidence that a tax is ‘broken’,” the response says.
“Tax reliefs are introduced for many different reasons. While some may be intended to address concerns about the function of the tax system, they may also be used to provide support to certain sectors, or to incentivise particular behaviour.”
The government also said in the response: “Business rates reliefs for charities and small businesses support these important features of our society, which bring benefits to communities and local economies.”
A review of business rates is expected to take place in the near future.
Robin Osterley, chief executive of the Charity Retail Association, said the relief was vital for many charities reliant on income from their charity shops.
“We are pleased that the government has signalled that existing business rate reliefs will be retained,” he said.
“Business rates impose an excessive and disproportionate burden on high-street retailers, which is why small business rates relief, retail rate relief and charitable rate relief are all so essential to thriving high streets and town centres.
“Access to a mandatory 80 per cent charitable rates relief in England supports charity retailers to raise money for charity, reduces the amount of waste generated through reuse and in providing 233,000 volunteer opportunities.”
The Charity Tax Group said in a statement: “We welcome the confirmation that the government has no plans to review existing business rates reliefs and makes a point of highlighting the value of charitable rates relief in supporting local communities.
“Rates relief is extremely valuable to the sector and is worth more than £2bn a year in England alone.
“We are aware that the government is planning a wider review of business rates later this year and will be calling for charity rates to be protected – and charities left no worse off – and where possible strengthened with greater access to discretionary relief.”