A party seeking to restrict another's commercial activities must consider whether such terms are normal in similar, factual and contractual circumstances.
The Commission have their sights set on charities that have entered into business rates arrangements that exploit tax legislation artificially and serve to benefit private interests, with charities benefiting as a by-product rather than a principal aim.
Reasonable and prudent tax planning is fine but the Commission want an appreciation of the potential of some business rates avoidance schemes to bring reputational damage to charities and the sector generally.
The Charity Commission has warned that appropriate advice on reliefs such as business rates should be taken.
The main concern on business rates is charities leasing empty properties from private landlords, carrying out limited or no charitable activity and claiming relief. The arrangement allows the Landlord to save money on empty properties with the charity also sometimes receiving a reverse premium from the Landlord.
The caselaw to date focuses on offices used for the display of artwork with little or no public access, wifi transmitters in office blocks and partial occupation of warehouses. The key question of whether the property is used wholly or mainly for charitable purposes is yet to be definitively answered in relation to the persentage use of floor space. The generally accepted view on charity shops for charitable use is anything greater than 50% of the floor space qualifies but the question remains for other properties.
This is another timely reminder to charities to take advice as the Commission are threatening investigations.
For more information
Contact Dominic Curran
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