Department of Finance Update on Non-Domestic Rates Consultation/Charity Exemption

The Department of Finance has just published a report of its 2019 consultation on non-domestic rates (delayed from 2020 due to the pandemic) in order to inform “Departmental policy thinking in the medium to long term.”  As with previous rates reviews, the issue of the charitable rates exemption has come under scrutiny and been questioned by some, with 33 of the 58 respondents commenting on the charitable rates exemption, saying it should be reviewed or reformed.  A number of those arguing for its review or reform asserted (without basis in our opinion) that the charitable rates exemption was having a negative effect on, or skewing the commercial letting market.  A number also argued (again without basis in our opinion) that the letting of vacant properties to charities to avoid paying vacant premises rates was detrimental to businesses.  Given the potential threat to the charitable rates exemption if some of these unsubstantiated opinions were acted upon, NICVA has responded to the Consultation Report.  In our response we highlighted the importance of ensuring that any future changes to the rates system are based on sound evidence and not on any unsubstantiated perceptions or misconceptions. 

We highlighted that the charitable rates exemption is a vital tool to prevent the unfair taxing of public charitable giving, and to recognise the public contribution which charities make (and under charity law are required to make), as distinct from private businesses who have no such legal obligations and, whilst operating for private profit, make their public contribution through the rates. We pointed out that it is the misunderstanding of this distinction and legal difference between private businesses and charities that often underlies unfair calls for charities to be treated like businesses for the purposes of the rates system.

We also highlighted the lack of a valid rationale or solid evidence for the claimed negative impact of the charitable rates exemption on private business and market forces.  For example, unsubstantiated and illogical claims have been made that commercial rents were being skewed by landlords letting to charities who receive a rates exemption, or that landlords letting premises to charities to fill otherwise empty and ratable premises was somehow damaging to business.  In fact, post-Covid and in the current cost of living crisis, charities own resources are heavily over-stretched as shown by recent research by NICVA into the impacts of both (see here and here) further countering the idea that they can afford inflated rents.  Our response also highlighted that, as a number of respondents suggested, lowering or giving temporary ‘holidays’ from commercial rates represents an important potential lever to make business rental space more affordable, and a much more logical one than charging charities rates in order to prevent a perceived rent inflation caused by the charitable exemption for which there is little or no evidence. 

We have urged the Department of Finance to take the above points be taken into consideration when taking forward policy in this area and offered contribute to any further consultations or discussions as and when they emerge.  NICVA will continue to monitor this vital issue for the sector closely.