About this guidance
This guidance provides ratepayers and local authorities with information about non-domestic rates (NDR) charitable rates relief. It applies to Wales only and does not replace any existing NDR legislation or any guidance on other reliefs.
Billing queries about the relief should be directed to the relevant local authority. Contact details for local authorities can be found here. Enquiries about this guidance and the related legislation should be sent to the Welsh Government at the following email address: LocalTaxationPolicy@gov.wales
A range of other mandatory and discretionary NDR reliefs are also available to specific types of property or occupiers. Further information about NDR relief schemes can be found on our Business Wales webpages
Introduction
The Local Government Finance Act 1988 (the 1988 Act) provides that properties which are owned or occupied by charitable organisations are entitled to mandatory NDR relief. This is set at 80% of the occupied rates bill. This relief is also available to community amateur sports clubs (CASC).
Mandatory relief is fully funded by the Welsh Government. Therefore, local authorities are not required to pay the amount foregone into the pool.
Local authorities may ‘top-up’ the relief to 100% of the occupied rates bill at their discretion. Local authorities are required to pay 75% of any such ‘top-up’ into the NDR pool. The remaining 25% will be funded centrally.
A local authority does not have to offer discretionary relief. However, if it does decide to, it is good practice to award relief on the basis of eligibility criteria made available on the local authority’s website.
Eligibility criteria for charities
An occupied property on the local rating list is entitled to mandatory relief if:
- the ratepayer is a charity or a trustee of a charity; and
- it is used wholly or mainly for charitable purposes.
There are also additional terms and conditions for charity shops, which are described later in this section.
Is the property occupied by a charity or a trustee of a charity?
Before a local authority awards relief, it must satisfy itself that the organisation applying for relief is in fact a charity (or trustee for a charity). If the organisation is a registered charity with the Charity Commission, in most cases it will be able to provide its registration number.
However, not all charities are registered charities. Further information on charities which do not need to register can be found on the Charity Commission website.
If a local authority has any doubt as to whether an organisation is a charity, it may ask for a letter from HM Revenue and Customs confirming the organisation is treated as a charity for tax purposes.
Is the building used wholly or mainly for charitable purposes?
Buildings are used for a range of charitable purposes and, in many cases, it will be clear that they are being used ‘wholly or mainly’ for charitable purposes. They may, for example, be used to accommodate charity headquarters or for community, training and educational centres or as charity shops.
Recent case law provides greater clarity on whether local authorities should award relief to charitable organisations if they do not use a substantial part of the property. More information on this issue can be found on the Charity Commission website.
If a local authority has an application process, the charity should be asked to provide a clear explanation and justification for the intended use of the buildings.
The Charity Commission is aware of cases where charities are being approached by retailers and landlords of hard-to-let property to enter into tenancy agreements that would relieve the landlords of the requirement to pay full NDR.
Additional terms and conditions for charity shops
Section 64(10) of the 1988 Act states that a charity shop is only entitled to mandatory rates relief if it is ‘wholly or mainly’ used for the sale of goods donated to a charity and the proceeds of sale of the goods (after any deduction of expenses) are applied for the purposes of a charity.
It is common practice for the following to be taken into account when determining whether a charity shop is wholly or mainly used for the sale of donated goods:
- The percentage of floor-space occupied by donated goods;
- The percentage of turnover and profit represented by the sale of donated goods; and
- The percentage of individual items sold which are donated goods.
Some businesses have previously raised concerns about the growth in the number of charity shops on the high street. While stakeholders recognise many benefits of charity shops in Welsh towns and cities, some believe that the sales of new goods in charity shops presents an element of unfair competition to small businesses.
When awarding discretionary ‘top-up’ relief to charity shops, local authorities must be mindful of the effect charity shops might have on local businesses. Local authorities should carefully monitor numbers in different areas and adjust their policy on discretionary ‘top-up’ relief accordingly. If a local authority believes charity shops are having a negative effect on the local economy, it may for instance choose, in accordance with the 1988 Act, not to award discretionary ‘top-up’ relief to any charity shops. If a local authority is specifically concerned about the sale of new goods in charity shops, it may choose to set a higher threshold in relation to the discretionary ‘top-up’ relief than it would normally require under mandatory relief.
It is good practice for local authorities to undertake periodic inspections of charity shops, even if they have no reason to suspect an excessive proportion of new goods is being sold. Inspections should be conducted at different times of the year so the extent of compliance can be checked during normal trading conditions.
Local authorities may also choose to undertake an inspection of charity shops in the run-up to Christmas, to ensure charities continue to comply with the rules on new goods during this period.
It is the charity’s responsibility to ensure staff and volunteers are aware of the rules on the selling of new goods. If a shop is found to be breaching the rules, it must no longer receive mandatory relief. If the local authority is issuing discretionary relief, it may wish to issue a formal letter informing the charity that it no longer qualifies for discretionary relief and that relief will, as a consequence, be withdrawn.
Eligibility criteria for community amateur sports clubs
An occupied property on the local rating list is entitled to mandatory relief if:
- the ratepayer is a registered CASC; and
- it is wholly or mainly used for the purposes of the CASC and/or similar organisations.
However, a local authority cannot offer relief to a CASC for a property which is an excepted hereditament.
Before a local authority awards relief on this basis, it will need to check if the club is a registered CASC, as defined by section 658 of the Corporation Tax Act 2010. An up-to-date list of clubs registered with HMRC can be found on the GOV.UK website. The website also includes further information for organisations wishing to become registered CASC.
If a sports club is neither a charity nor a registered CASC, a local authority may still decide to award discretionary relief under their general powers to do so. When making a decision to award relief, local authorities may wish to bear in mind the legal definition of a CASC and the extent to which the organisation contributes to the local community and the local authority’s objectives for social inclusion.
Local authorities may wish to consider using a points system to assess applications for relief. The amount of relief given need not be 100% in all cases and a lower percentage may be awarded if some but not all criteria are met. Criteria for any such system should be made publicly available in the interests of transparency.