Charity shops gaining unfair advantage over small businesses

The new breed of professional charity shops selling new goods are undercutting small businesses and should no longer benefit from tax breaks, claims The Forum of Private Business (FPB).

With the complexion of charity shops changing enormously in recent years, many big name charities are now competing directly with small businesses.

The UK’s 6,500 charity shops benefit from tax concessions under UK tax law because all the profits from a charity shop go to fund the work of the charity, which is perceived as being of public benefit.

Charity shops benefit from exemption from corporation tax on profits, 80% mandatory rate relief and a zero V.A.T. rating on the sale of donated goods. A further 20% rate relief is available at the discretion of local authorities.

"Small businesses are becoming increasingly frustrated with the new style chain charity shops which are actually more like businesses with the buying power of a major retailer,' said the FPB's campaigns manager Victoria Carson.

"The line has become blurred. Many charities like Oxfam and Sue Ryder are now aggressively competing in the commercial market place employing professional staff selling a range of new goods. They have disposed with the volunteer led shops selling cheap donated goods.

“Yet they still keep their costs down by benefiting from generous tax. Meanwhile smaller businesses have to meet overheads such as rent, rates, the minimum wage and corporation tax."

Several FPB members, with direct experience of the issue, have expressed their views. Caroline Bond, managing director of the Tradewinds Gifts Ltd shops in London said;

"I work hard to source ethical lines from much smaller suppliers both in the UK and the third world than many charity shops. It is better that charity shops are professionally run. But if they are going to compete with small business then they should bear the cost. It did not matter when they were selling low cost second hand goods. But they should pay business rates, mine are hefty."

Christine Longworth, owner of Cards Plus in Westbury, Wiltshire, which sells cards and gifts said;
"There very much has been a change in how some charity shops are run. It is only fair that if charity shops sell new goods, and if they are buying stock in bulk with the power of a chain, that they should not get the tax breaks. And if the charity shops employ professional staff then not all the money raised in the shop is going to the charity. Charity staff are being paid more than me! Not paying full business rates also helps them afford to get prime location premises which is another advantage."

Gordon Frankland, owner of the Hale Bookshop, Hale, Manchester added;
"If charity shops are selling regulation retail goods - say if at least 10 per cent of their stock is new - then they should pay regulation retail taxes. If it's jumble shops then that's different and you would not expect them to pay full taxes."

Small businesses are already feeling tremendous pressure from the supermarkets, out of town shopping centres and aggressive parking regimes and the FPB claims that charity shops are now adding to that pressure.

Therefore the FPB believes the definition of charity shops should be changed. It believes charities that sell new goods and employ professional staff should pay full business rates and corporation tax on profits, to allow small businesses to compete on an equal footing.