Charity shops and the Rates Rethink

21 Apr 2017 Ryan Miller    Last updated: 21 Apr 2017

Máirtín Ó Muilleoir brought forward the Rates Rethink consultation
Máirtín Ó Muilleoir brought forward the Rates Rethink consultation

The Department of Finance has been considering a rates liability on charity shops as part of its sweeping Rates Rethink. Scope examines the issue.

The Rates Rethink is just one aspect of local governance that is on pause while the Stormont talks continue. For the charity sector, it is a vital one.

The Department of Finance has proposed a 20% rates liability for all charity shops across Northern Ireland.

Consultation on this issue closed two months ago but, given the current political situation, a final decision is unlikely.

Rates are one of the few fiscal measures Northern Ireland holds within its own gift. High rates can be too onerous just as low rates can allow organisations – be they private or third sector - to flourish.

However, here in NI we also need to move towards a greater level of self-sufficiency. This is nothing to do with the constitutional question and everything to do with a healthy aspiration for a thriving society.

In a healthy economy taxes can be set which allow businesses and other organisations to thrive while still providing for great public services and, in simple terms, government will seek for this dynamic to strengthen itself with infrastructure supporting industry supporting infrastructure.

Northern Ireland does not have this luxury. Even with a heavily subsidised public sector, our services are struggling. Meanwhile, the wider economy could hardly be said to be performing brilliantly.

Altogether this means we need to make good decisions to see benefits. This is not easy.

It is in this context that one should examine the arguments for increasing any tax burden, including rates, on any type of industry, including charity shops.


A significant part of the DoF’s apparent rationale for increasing the liability on charity shops is the revitalisation of high streets. The department’s thinking here is flawed for several reasons.

Retail unit vacancy rates across Northern Ireland currently sit at around 15%. It seems unlikely that increasing the rates burden for charity shops would do anything other than increase this percentage, while clearly there are, in general, plenty of facilities for private trading that are not being used because of the general climate.

Charity shops are not awash with cash and it is far-fetched to think that they are pricing viable businesses out of the very best retail locations.

Moreover, for the most part they would not see themselves as direct competitors with private businesses – certainly when considering the sale of second-hand and donated goods – and, indeed, there are already structures built in to the rating system that mean charity shops compete equitably with other retailers on the basis of newly bought stock.

Per NICVA, outlining its position and the substance of its consultation response: “We strongly refute that charity shops compete commercially with private sector retailers, and where they do in the sale of new goods, charity shops pay 100% rates relative to their donated/new goods ratio.”

It seems far more plausible that charity shops are a symptom rather than a cause of declining high street business – with online options the dominant reason behind retail shops’ struggles.

Which is not to say high streets cannot be reinvigorated – there have been plenty of good ideas and innovations that have aimed to do this, and with success – but that putting more pressure on charity shops is not going to do anything to help this issue.

NICVA itself says: “This charitable exemption on rates is the largest tax relief available to charities and is vital for their continuing work. There is a real risk that the additional burden of a rates bill could force many charity shops to close (estimates are around 16% of shops could close) which will have an impact on the level of charitable work they can continue to undertake.”

Finally, there is a tonal undercurrent suggesting that seeing a charity shop occupying a retail unit is a shame, a missed opportunity, and a dismal comment on the health of the economy of a village, town or city.

That is not only a condescending attitude, it is a wrongheaded one that ignores all the benefits brought to local communities.


These community benefits are important and they offer some counterpoint to the most compelling argument for why charities should pay some rates - the idea that everyone should contribute.

Some counterpoint, but perhaps not a complete one.

That any contribution should be on the basis of the ability to pay fits snugly with charities’ ethos and so, rather than dismiss these ideas entirely, the charitable sector should support the principle of proportionality.

Firstly, there is the core work provided by various charity shops, which is clearly of benefit in two directions – the goods they sell are of use to the people who buy them, while their returns also go into charitable services.

However, there is a limit to how far this argument will go, amounting as it does to a reaffirmation of the charitable nature of charities.

Nevertheless, it is worth noting NICVA’s observation that:

“If a 20% rates were introduced for charity shops in Northern Ireland, the Charity Retail Association UK argues that charity shop profit would likely drop by 5%, leading to a reduction of over £500,000 for charitable causes in Northern Ireland. These charitable causes include cancer screening, emergency food and shelter for families in need, life-saving research, child protection, patient services to name a few.

“Charity Retail Association UK’s research also states that 130 jobs would be lost in the charity retail sector, 16% of charity shops would close and 15% of volunteering opportunities would be lost. Many of our members identify that it would largely be shops in rural areas, smaller towns and villages that would close as these generally have lower sales income and would therefore be impacted harder with an introduction of rates.”

Wider context

Also important are the auxiliary benefits provided by the work of charity shops including the employment they provide, plus the reduction in vacancy rates and any associated increase in footfall – as above, it is just as possible to argue that the utilisation of units, in a climate where vacancy rates are 15%, is a reason not to impose increased rates liabilities as it is one to impose them.

Perhaps most of all, there is the environmental boon from reusing and recycling goods, whether that be books, clothes or whatever else:

“The charity retail sector is able to sell or recycle over 90% of donated clothing, over 90% of donated books and 85% of donated electrical goods. This diverts waste away from landfill, improves recycling and re-use rates and saves the public purse significant disposal costs. In 2012, the Environment Minister stated that charity shops diverted 11,000 tonnes of textiles alone from landfill. This brought a saving of £928,400 to local councils at the Standard Landfill Tax rate of £84.40 per tonne.  The Charity Retail Association estimated that in 2015, 21,000 tonnes of textiles were diverted from landfill by NI Charity shops which would bring a saving of £1,772,400 at current landfill rates.”

Nevertheless, many of the above arguments – provision of goods, creation of employment and associated social benefits, etc – could equally be made by private shops, and they pay full rates (though more on this later).

Overall, a better question to ask is whether the 20% liability that will see an estimated 16% of extant charity shops close could be said to be proportionate.

“While the contribution to the public purse that would be made by charging charity shops 20% of their rates bill is quite small, that money is extremely important to the charities operating shops in delivering on their charitable purposes. The consultation does not reference the existing 100% rating re. new goods and it is unclear whether the new proposals for 10-20% would run in addition to or instead of the current 100% rating.

“Every pound which would be paid by charity shops in rates is a pound not available for charitable benefit, in many instances benefits for the public of Northern Ireland. We argue that any proposal to introduce rates for charity shops is, essentially a tax on funds generated and donated by the public for charitable activities which is without precedent in other policy.”

Further, it is also fair to ask whether the question of proportionality, or ability to pay, is applied fairly across the board.

Northern Ireland still has a domestic ratings cap on properties valued above £400k – but this is also under review and the Rates Rethink consultation proposes the removal of this cap. The DoF can say that its overall aims are progressive.

Charity shops should pay their way just like anyone or anything else. The real question is what this means, and any decisions made by the DoF should pay full heed to what the outcomes will be.

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