You may have seen some recently publicity on charities being approached by retailers and landlords to enter into tenancy agreements that would relieve the landlords of the business rates. Charities are also marketing the fact that they are happy to enter into this agreement.
While there are advantages for charities in doing this, there are also risks associated if charities don’t follow the proper processes before entering in to the agreement and if the property is not occupied.
In summary, charities occupying commercial property qualify for an 80% discount on business rates, provided that the property is used mainly for charitable purposes whereas commercial properties that are unoccupied for over three months have to pay the full business rate.
However, there is a risk that some such agreements may be viewed as business rates avoidance by the local authority. This would mean the charity could lose the discretionary discount and be required to pay 20% of the full business rates.
The Charity Commission is aware of over 700 tenancy agreements where this may be the case. For the full article, visit the Charity Commission website.