Response to Rate Exemptions

1. Introduction

NICVA (Northern Ireland Council for Voluntary Action) welcomes the opportunity to respond to the DFP consultation on Non-Domestic Charitable Exemptions and Reliefs from Rate Liability in Northern Ireland - A Policy Paper.

NICVA is the umbrella body for the voluntary and community sector in Northern Ireland. It provides almost 1,000 members with information, advice and training on a wide range of issues from management consultancy and finance, through policy development and lobbying. NICVA adopts a community development approach, attempting to empower local communities to pursue their own needs and agendas.

NICVA's response is based on NICVA's consultation work with DFP and its members, and also reflects comments by members via its Charity Advice service. This response is limited to the parts of the consultation which will affect NICVA Membership and the sector.

2. General Comments

2.1 NICVA welcomes the proposals set out in the policy paper and recognises that cognisance has been taken of other relevant consultations and proposals for changes in policy - most notably the 'Review of Charities Administration and Legislation in Northern Ireland in 2005' and the 'Review of Public Administration'.

At this time the Policy Paper therefore is confined to examining the 'charitable' issues that emerged from the consultation on the Review of Rating Policy and in particular the treatment of properties used for:

- Public or charitable purposes;
- Sports and recreation; and
- Certain other functions such as religious worship.

It is expected that the expansion of the definition of charity will help to reflect the wide range of charitable organisations working in Northern Ireland. NICVA anticipates that DFP will implement rating reliefs for any new charitable bodies that may arise following the modernisation of charity law in Northern Ireland.

2.2 The importance of rates exemptions and relief for organisations within the voluntary and community sector should not be underestimated. These reliefs help to maintain the sector and the vital work it does in providing services to the more disadvantaged and marginalised within our society.

NICVA's experience through its advice services is that reliefs and exemptions contribute to the very survival of those organisations which are newly established or whose income is restricted.

3. The Proposals

3.1 NICVA welcomes the proposal to retain the entitlement of complete exemption from rates for charities provided that their premises are used for charitable purposes.

3.2 The government's intention to retain the current position in relation to 'quasi charities' or recreational charities at this stage is welcome. NICVA would argue that such organisations are at the core of modern charitable activity and contribute enormously to counteracting the effects of poverty and disadvantage, as well as contributing to the health and wellbeing of the community in other ways. However there needs to be some clarification and definition around these types of charities.

3.3 NICVA agrees that the system of rate relief for charity shops in Northern Ireland works well and should be maintained in its present form. In Great Britain a charity needs only to sell 'mainly' donated goods to qualify for 80% or full exemption (the 20% is at the discretion of the Local Authority).

In Northern Ireland charity shops are treated as 'used for charitable purposes' to the extent that they are used for the sale of donated goods so long as the proceeds (after expenses) are applied for charitable purposes. If new or bought-in goods are sold, then the relief is reduced by a process of apportionment.

After considering introducing the Great Britain model (where a charity shop needs only to sell 'mainly' donated goods to qualify for 80% mandatory relief), the Department says the government concluded that the system in Northern Ireland works well in providing an incentive to maximise the level of donated goods sold through charity shops and in doing so reduces the selling of new goods, thereby suppressing direct competition with local retailers.

In relation to proposal (b) the review of charities legislation in NI does not overtly cover the issue of trading or the treatment of 'fair trade goods' and it is not envisaged that it will. Therefore the Department needs to consider the rating implications for charity shops which sell 'fair trade goods'. NICVA would argue for the sale of 'fair trade goods' from charity shops to come under the scope of charitable tax and rates exemptions. Fair trade goods should be deemed in the same way as donated goods are and should have a special classification so as not to be confused in the future.

3.4 The Initial Regulatory Impact Assessment identifies halls as being village halls, community centres, women's institutes and Hibernian, Masonic and Orange and other halls.

NICVA agrees that halls should not be awarded full automatic exemption from rates unless they can demonstrate that they are available for the use of the wider public. As is the case in Great Britain when determining eligibility, the contribution that the organisation makes to its local area must be considered.

DFP's intention to lessen the present requirement on halls to keep detailed records of use is a concern. How will halls qualifying for the relief be accountable to the general public for their activities if they are not required to maintain detailed records of use? NICVA would ask the Department to consider whether such a requirement is a burden, or is it not something that halls should do anyway in the course of their work, and for purposes other than compliance with rates legislation? For example, do they not need to keep records of usage for health and safety and insurance purposes? NICVA believes that the Department and VLA should work with other regulators and interested parties, for example, Health and Safety Executive and Insurance Companies, to agree a standardised template for record keeping that will be suitable to all. This should not only assist those managing halls to keep necessary records as part of their overall good governance, but should mean that the information is not too onerous to produce and that only one set of record keeping would be necessary.

NICVA believes that the monitoring of the use of these halls is essential and full exemption should only be available if they prove they are accessible to the community of the local area. This should help to develop local infrastructure, community development create community focus and also help towards the revenue costs of such premises.

To enable this to happen further work may be required on the definition of catchment areas and the type of evidence required to prove that there has been effort put into to engaging with the local community to promote the use of the halls.

In relation to the sale of alcohol on these premises this should be permitted and exempt insofar as any profit made on such sales is re-invested back into the charitable work of the organisation. This could be controlled by allowing a maximum number of temporary licenses per annum.

3.5 NICVA supports all of the proposals in relation to rate relief for qualifying sports clubs as being beneficial to charitable sports and recreational organisations as well as to non-charitable voluntary sports groups which are often closely inter- related with the broad charitable sector in general. NICVA recognises that in many instances amateur sport has been successfully used as a mechanism for community development in Northern Ireland.

3.6 In the course of NICVA's policy work on the Strategy Unit Report 'Private Action, Public Benefit', no charities were opposed to the idea that social economy organisations could benefit from the sorts of tax or rates reliefs currently available to charities. Indeed many were closely aligned with social economy initiatives arising out of charitable activities in communities and are conscious of the struggles that many social economy organisations face in trying to address unemployment and economic disadvantage in challenging circumstances.

NICVA proposes that social economy organisations could be rates exempt, depending on income generated. Thresholds could be set based on the organisations income, for example, those whose income is under £250,000 could get full rates relief and those under £500,000 get partial exemption. Consideration should also be given to those social economy projects that are making very little profit even though the turnover is high.

It should also be recognised that charitable and other voluntary and community organisations are being encouraged to initiate social economy projects for the purposes of income generation. Future changes in rating policy should take account of this.

For more information

Denise McCann
028 9087 7777