Charity Shops

Trading Charities and Charity Shops 

Some charities "trade" as part of their primary purpose.


Other than this, why would a charity want to trade ?  In order to sell the stuff it receives from donors or maybe just to make more money, I hear you say.  There are a number of ways a charity might trade. Perhaps the most common is the "charity shop" which, in particular, might be set up so that the charity can sell the "stuff" which is donated to it. What's wrong with that I hear you ask. Maybe nothing, I reply. The donors get rid of their unwanted second hand stuff. The shoppers get something they want, at a very reasonable price. In the middle, the charity makes some money for it to spend on its good causes and the rubbish which might otherwise go to landfill is reduced.  What's not to like ?  I suppose that would depend on how many "normal" traders the charity either puts out of business, or displaces from their existing premises or maybe even dissuades from starting up in the first place. Take a look at how many charity shops there are, particularly in our city centre.


My concern is that the substantial tax and financial benefits provided to charities are a form of state aid which enables them to unfairly compete against normal businesses.

The Charity Commission has published its guidance to assist charities,  including their trading structure and tax planning

Paragraph 2 of that Guidance refers to: “considerable advantages in the tax treatment they receive in relation to trading and trading profits.” and says “charities may trade more or less freely in pursuit of their charitable objectives”. It seems the Commissions Guidance is not intended to be exhaustive in giving examples of “more or less”. I was therefore expecting that the Commission would at least be able to express an opinion as to how the comment in its own Guidance that “charities may trade more or less freely in pursuit of their charitable objectives” is applied. It seems as though the Charity Commission looks after the interests of UK charities rather than the general public or anyone else although, in fairness, it did suggest that the unfair competition issue should be put to the local Trading Standards Office. However, the local Trading Standards Office has said that the matter is outside its remit.

The unfair competition issue has also been put to the Competition and Markets Authority.


It seems to me that the degree of accountability/regulation/policing of charities does not reflect the substantial amount of taxpayers money which they receive

Business Rates 

Charities receive an 80% discount on their business rates. Sometimes they receive a bigger discount. Business rates help to provide services to the local community via the local authority. Who is responsible for the decision to divert money away from the local community into the coffers of the charities - which may or may not be local. 

I understand that a charity is entitled to an 80% discount on its business rates and maybe 100% at the discretion of the local authority.

However, for tax reasons, I believe that many charities set up a separate limited company in order to carry out their trading activities. I then understand that some cash strapped local authorities have been seeking full business rates on properties occupied by those companies.  This seems fair to me.  What do you think ?


Value Added Tax 

Charities also receive some VAT concessions which broadly means they might be charged reduced VAT on some goods and services for which they have to pay. There might also an exemption for fundraising income.

Income Tax, Capital Gains Tax & Inheritance Tax 

Charities also benefit from reliefs for Income Tax, Capital Gains Tax and Inheritance Tax, including in respect of donations from the wealthy. This is outside the scope of this blog. 


Volunteering to work for a charity is commendable, particularly if the work is in connection with the charity's primary purpose. However, if the volunteering work is in connection with the charity's trading entity, maybe it is less commendable if it further enables the charity to unfairly compete against normal businesses and may be responsible for putting paid workers out of work.  I believe that many of these volunteers are pensioners. By definition they too are "state aided".  Also, I am not sure it is fair that some charity workers are paid and some are not. For example it doesn't seem right that unpaid, state sponsored volunteers should help fund highly paid executives 

However, for the volunteers, that is a matter of personal choice.  What do YOU think ? 

How many charity shops in Wolverhampton City Centre 

At some point I might have a walk around Wolverhampton City centre, which I might define as inside the ring road, and make a list of all of the charity shops. If you have a spare hour or two, please feel free to have a look for yourself.  However, I'm wondering how much in business rates is being "lost" because normal businesses (ie those businesses which would be liable to pay full business rates) have been displaced.  Don't take my word for it. Have a look at what the Guardian had to say.

Has the number of charity shops in our city centre had the effect of reducing the number of "normal" businesses ?  

What do you think ?

In addition, I believe that one particular charity has been given permission to operate a café within very close proximity to two existing independent cafés, one of which has a system for customers to provide support for the homeless, and which is a meeting place for vulnerable groups. Having recently been rescued by government covid-19 action, it would indeed be ironic if one or both of these cafés were to be put out of business by a taxpayer funded entity such as a charity. This cannot be right. 

I was advised by the Local Authority planning officer that the granting of permission to the charity to operate a café is not a "planning" issue. Maybe it should be.

Sadly, one of those cafés has announced on social media that it does not intend to reopen post lockdown. I do not know whether this was purely because of covid-19 or whether the risk of trading in competition with a charity played a part. 

Wolverhampton City Council 

Maybe our council planners are in a difficult position. If a landlord approaches them and says that the only "business" which is prepared to pay rent, is a charity shop what do the planners do. Do the planners say "OK then" - and accept lower business rates or do the planners apply pressure for the landlord to get a "normal" tenant who pays proper business rates. Maybe the landlord might not be happy with this, as a tenant who pays normal business rates might seek to pay a lower rent. 

Some are suggesting that there is a mistaken view that charitable relief has a distortive effect on

high street rents.

Supply and demand are part of basic economics.

My questions to the City Council might be along the lines of: 


  1. Is it encouraging landlords to prefer a charity tenant because a charity tenant can afford to pay a higher rent than a normal business as it pays substantially less in business rates. 


  1. To what extent does it believe that taxpaying businesses (which have to pay their employees) are therefore being put out of business or at least are being displaced. 


  1. Why does the Council consider it to be acceptable for a taxpayer supported entity to be given permission to set up in direct competition with normal commercial businesses which have to pay their taxes and employees. 


  1. Whether the Council is given a limit on the number of charity shops it may approve, particularly in a city centre. 


  1. Is the Council provided with central government funds to replace the business rates it is “giving away” to charities. 


  1. Are business rates charged to normal businesses higher than they otherwise might be, because of the business rates “lost” due to charity tenants. 


This leads to other questions:

  1. Are there any constraints placed on the trading practices of charities, particularly where they compete against normal businesses which pay all employees and pay their taxes ?
  2. If there are such constraints, what are they ?
  3. If there are no such constraints:
  • Why not ?
  • What should those constraints be ?
Maybe the published Charity Ethical Principles provide a defence for "normal" businesses against the predatory trading practices of charities. 


I do not believe it is the intention of Parliament that charities should compete against normal businesses whilst, at the same time, charities receive significant taxpayer support.  What do YOU think ?  

Overall, I believe this is a subject which is deserving of further research.  Comments are welcome, as always.  It seems to me that it is time for a parliamentary enquiry so as, at the very least, to set out some ground rules for charities. 

See also -