Revised Guidance on Rate Relief for Charities and Other Non-Profit Making Organisations
July 2002
The Association of Chartered Certified Accountants (ACCA) is pleased to have this opportunity to comment on the Revised Guidance on Rate Relief for Charities and Other Non-Profit Making Organisations (the guidance). These comments have been prepared in consultation with members of the ACCA's Public Sector Technical Committee, a group of experienced accountants working in the public sector.
ACCA considers that this guidance should be made more comprehensive with the inclusion of:
- guidance on rate relief for village shops and farm diversification schemes (paragraph 1.2)
- examples of proforma questionnaires that have been used by local
authorities to collect the information necessary to make decisions on rate
relief (paragraph 3.5)
and - guidance on the provision of rate relief for other public sector organisations (paragraph 3.6).
On the last point, we are aware of one public sector body, with offices across England, which receives a wide variety of different levels of discretionary rate relief. Approximately two thirds of its offices receive no relief, one office receives 50% relief, nearly a third receive 80% relief and one office receives 100% relief from the relevant local authorities. This conflicts with the objective of the guidance to ensure that ratepayers receive consistent treatment for similar cases in different areas.
We believe that the distinction in the funding regimes between discretionary relief given to ratepayers who are in receipt of mandatory relief and that given to ratepayers who are not in receipt of mandatory relief should be made clearer. For example, paragraph 4.2.2 of the draft guidance states that, '75% of the cost of all discretionary reliefs is met centrally, with the local authority, and through them, the council taxpayer meeting the remaining 25%'. Paragraph 4.1.4, on the same page, states that, 'discretionary top-up [to mandatory relief] is 25% centrally funded'.
In Chapter 6 we consider that the guidance on charity shops could be improved, specifically by making paragraphs 6.2.3 and 6.2.4 clearer. We believe that the guidance should outline best practice rather than just listing the range of current practice adopted by local authorities.ACCA believes that profit does not provide a reasonable measure of whether a shop is mainly used for charitable purposes. This is because the rate of profit on donated goods will be nearly 100% and certainly much greater that that on the sale of purchased goods. We believe that the percentage of turnover that relates to donated goods would be the most effective and objective measure (at least for entities that are registered for VAT). Donated goods are zero-rated and so their turnover will be clearly differentiated from that for other goods in the entity's VAT returns.
We believe that the final bullet point of paragraph 6.3.1 should read: 'annual income from all sources amounts to at least £1,000'.