Healthy Planet, a registered environmental charity, promises landlords a “50 per cent saving on rates costs” if they grant a temporary lease, but asks for half the shop’s true business rates liability as a “tax deductible charity donation” in return.
“We are the next best thing to a shop being completely empty. There is no one else who wants this space,” says Shaylesh Patel, founder of Healthy Planet. The charity is receiving cash to occupy about 60 empty shops, which simply have posters in the windows advertising its website, and also operates 13 Books for Free shops, where it distributes unwanted books to local communities.
In 2009, Blacks Leisure paid Healthy Planet to occupy 77 unwanted stores in order to mitigate its rates liability. Blacks confirmed it was making payments to Healthy Planet “towards its store occupancy and administrative costs”. The charity still occupies 25 ex-Blacks stores and also receives similar donations from other landlords.
“Different councils interpret us in different ways,” Mr Patel said, claiming that more than 60 local authorities accepted that putting up posters counted as occupation.
Following government “empty rates” legislation in 2008, property owners have had to pay full business rates on boarded-up shops. In April 2011, this was extended to cover lower value properties, including small shops on deserted high streets.
Ratings experts say this has prompted an acceleration of “rates dodging” scams involving charities, many of which are legally questionable. The law states charity shops have to be “wholly or mainly used for the sale of donated goods” in order to qualify for a mandatory 80 per cent rates discount.
“There are some organisations which are pushing this into the area of a scam,” said Roger Messenger, president of the Institute of Revenues, Rating and Valuation, which governs rating professionals in the UK.
He said “donations for rates” schemes where charities are paid to occupy shops were “very common” in secondary and tertiary high streets where shops were “unlikely to ever be reoccupied”, stating he had encountered “many examples” of charities simply putting up posters, or “putting machines in units to send out messages to smartphones” instead of actually trading.
In recent weeks Mary Portas, retail adviser to the government, has complained about rising numbers of charity shops on the nation’s high streets. Nationally, one in seven high street shops lies vacant, as increasingly cost-conscious consumers migrate to shopping online, at out-of-town centres, or at large supermarket stores. The Financial Times has previously revealed that some high street landlords are prepared to charge retailers rents of just £1 a year in order to avoid the “empty rates” bill if they were to quit.
Charities occupying empty properties in return for a donation believe they are not breaking the law.
Healthy Planet approached HM Revenue and Customs to discuss the tax status of its 2010 accounts before the 2010 year-end and agreed an appropriate payment with HMRC before submitting its tax return and payment on time. These showed “donations” had jumped from £13,000 to £1.1m in the space of 12 months as the result of income from occupying previously empty shops. The amount of tax due was agreed before Healthy Planet’s accounts were audited.
“In the taxman’s eyes, if we’re getting this payment in return [for occupying a shop] then it’s not really a donation,” stated Mr Patel, who says Healthy Planet paid “several thousands of pounds” of tax in accordance with its agreement with HMRC.
He said the charity intended to turn all its shops into Books for Free stores in time, but could not find volunteers to run them.
“The point is, these shops may not ever be used as shops again,” said Andrew Cribb, the co-founder of 3Space, a registered charity that receives donations for occupying empty shops, and lets community groups use the space for free.
“Social enterprises and charities are delivering services, and attracting groups of people who will use town centres again,” he said. “A whole heap of youth charities using these parts of town could be a way of kick-starting rundown areas.”
This article has been amended since first publication to clarify the circumstances of Healthy Planet’s discussions with HMRC.
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