SCVO has been keen to support an open conversation about tax, including the purpose, design, and language used to talk about tax. We therefore welcome the opportunity to respond to this review of business rates in Scotland. Within our response, business rates are understood to mean non-domestic rates.

Although this consultation is perhaps positioned towards businesses representatives, it is important that charities are seen as a valuable, important voice within this debate.

We believe that it is important that any changes to the system of business rates does not adversely impact the charity sector. We hope that the Scottish Government will take this opportunity to reiterate their commitment to the principle of rate relief for charities.

At a time where public funding for charities is significantly restricted, it is clear that many organisations are operating on very low margins. Consequently, any additional financial burdens in the form of new rates could have a significant impact on the sustainability of an individual organisation, and indeed the wider sector. This matters because the people affected will be the groups the sector supports, represents and works with.

Why charities matter

At present, there are 24,000 charities working across Scotland. Scotland’s third sector employs 138,000 people – as many as the Creative Industries and Energy Sector combined. Moreover, 1.3 million volunteers formally volunteer in organisations providing 126 million hours of support. The third sector thus has an invaluable role as an employer.

The modern day third sector encompasses a number of different services and activities. The diverse sector incorporates social care providers, community organisations, employability support organisations and research organisations. Through this work, the third sector is clearly making a real difference to the lives of people in Scotland and has a very real impact on service users, communities, and the people charities work to support.

The sector also occupies a position of trust in Scotland, with 82% of respondents to SCVO’s survey agreeing that charities are trustworthy and act in the public interest. This research also found that 84% of Scottish households used a charity in 2015. The third sector therefore occupies a strong, respected position in Scotland.

Charities exist for public benefit and these organisations raise money to further their charitable ambitions. To support these ambitions, we believe that the system of rate relief for charities should be maintained.

Current arrangement

At present, where an organisation is a registered charity, listed on the register maintained by the Office of the Scottish Charity Regulator (OSCR) and the property occupied by the organisation is used “wholly or mainly for charitable purposes”, there may be an entitlement to 80% mandatory rates relief.

It is up to each local authority to determine whether a property is being used “wholly or mainly for charitable purposes” and the local authority also has discretionary powers to top this relief up to 100%.

The Scotland-wide figure for charities rate relief for 2014-2015 was £181m.

However, given that some of Scotland’s largest property managing charities, generally regarded as sitting out with the third sector – such as Universities, Colleges, private schools, and ALEOs – are applicable for rate relief, it is likely that this very small group of large charities receive a large proportion of this total amount. SCVO would welcome a more systematic analysis of which charities are currently receiving full and partial relief.

While business rate relief for charities is most commonly associated with charity shops, charities can also apply for business rate relief on other non-domestic buildings, including office space and community centres.

When it comes to office space for administrative purposes, it is worth remembering that administration is essential to the achievement of charitable objectives. It’s therefore important that local authorities are willing to give discretionary rate relief for office space when the criteria has been met.

Overall, business rate relief helps to ensure the continued viability of a multitude of organisations across Scotland. In this sense, rate relief for charities works in much the same way as the Small Business Bonus Scheme and rural rate relief.

Added social value

Charities add social value beyond their core functions or objectives. For example, charities have value in job creation, volunteering opportunities, promoting community cohesion, local economic growth and play a key role in educational and training pathways.

Charity shops have a strong environmental impact, primarily through the diversion of material from landfill. Charity Retail Association (CRA) research shows that, UK-wide, the charity retail sector was able to sell or recycle over 90% of donated clothing, over 90% of donated books and 85% of donated electrical goods. It worth noting that this saves local authorities significant money through reducing the Landfill Tax councils need to pay.

Charity shops also offer employment and volunteering opportunities, providing vital experience for those with barriers to the labour market. Volunteering with charities or charity shops can equip young people and long-term unemployed with valuable skills. CRA research shows that 80% of charity shop volunteers believed that volunteering helped them to learn new skills.

Service-providing organisations which rely on accessible premises to fill their vital role, such as foodbanks and advice bodies, will also be threatened by increases in business rates. In many cases, rate relief enables many charities to deliver services that would otherwise be uneconomic to operate and ensure that resources are targeted at delivering public benefit by ensuring as much of their expenditures as possible can be used for charitable objectives.

Through all of these factors, charities therefore have an invaluable role in building and sustaining resilient communities. Pursuing reforms could have the unintended consequence of undermining charities ability to trade, increasing their overheads, and thereby also jeopardising the wider social value of the third sector.

As councils come under continued budgetary pressures, it is a realistic fear that local authorities may reduce exposure to avoidable costs including discretionary rate relief, as well as starting to search for added or increased rateable values. We therefore hope that the review is mindful of and will encourage local authorities to think of charities as having social value, rather than representing a financial cost through lost rates

Pressures on the high street

There has been severe pressures on our high streets over the past decade with challenges such as the growth of online trading and the recession negatively impacting household incomes. Many well-known high street names have closed down with many local highstreets struggling to fill vacant premises. Within this context, it has been claimed that charities are given an unfair competitive advantage.

However, research carried out by Demos found that there was no evidence that charity retailers have a negative impact on the local economy. In contrast, charity shops are exerting a stabilising influence on ailing high streets -maintaining footfall, catering to specific local needs, and filling shops that would otherwise be empty.[1] Considering that Scotland’s shop vacancy rate in July was 7.5% and there are sustained issues around footfall, we believe the continued presence of charity shops is crucial.[2]

Charity shops and commercial interests are thus partners in building vibrant, successful communities and high streets, rather than competitors.

Proposals for change

From early discussions with organisations in the sector, there were different views as to how we can make the system for respective to demand. From consulting with the sector, we are aware of two key proposals for change.

  1. Raise mandatory rate relief to 100%
  2. Improve and clarify local authority discretionary criteria

These preliminary discussions with members highlighted that the sector values rate relief highly and have strong opinions on the need for continuation of this relief.

SCVO would be happy to conduct further research and consultation with the third sector as this review progresses. We would welcome an open discussion as to how we can create something consistent that fits with local government priorities and also reflects the needs of modern charities.

Raise mandatory relief

Some of SCVO’s members support an increase in the mandatory aspect of business rate relief.

We note that this is the simplest, most transparent option for change as it would ultimately remove postcode lotteries in taxation. At present, the volatile funding environment means some charities do not feel confident that they will receive discretionary rate relief one year to the next. This, coupled with the disparity in how rate relief is applied from one local authority to the next makes it hard to plan for future delivery.
Growth in the number of charity shops over the past 20 years has also been attributed to the fact organisations are turning towards trading as a means of generating sustainable income in an uncertain climate. Many in the sector feel this diversification of funding should be encouraged, rather than hindered by business rates processes.

It is worth noting that, at present, some local authorities have criteria discriminates against organisations that do not have a local footprint. This presents specific challenges for charities who work internationally or nationally to prove their value to the local authority. 100% mandatory relief would ensure charities will be treated equally by the system of rat relief, regardless of location and activity. If charities meet the legal criteria necessary for charity registration, they would have equal access to rate relief.

Additionally, if discretionary rates were removed, it is believed that the sector would be able to make an even bigger contribution to Scotland’s economy and society.

Transparent, accessible criteria

An alternative to increasing the mandatory aspect of relief would be to assess the criteria for discretionary relief while maintaining the 80% mandatory, 20% discretionary split.

SCVO has long campaigned for the taxation system to be designed around specific guiding principles. In particular, transparency, simplicity and fairness. In order to promote these principles, it would be useful to charities if there were clearly published, visible criteria on each local authority website.

There is great inconsistency in criteria between local authorities, and the current lack of accessible criteria for the award of discretionary rate relief means that local communities are not able to hold local authorities to account for the operation of business rate relief policies. Transparent criteria, clearly published on each local authority website, will also assist the appeals process and enable organisations to see whether they are likely to meet criteria before applying, rather than wasting resources on applications destined to fail.

Organisations have noted that they have had issues applying for discretionary relief across their operational areas given the different criteria across local authorities. In some ways, discretionary rate relief criteria focused on exclusive local area provision also inhibit efforts by charities to diversify their services and income across Scotland. For this reason, perhaps it would be worthwhile if the Scottish Government and local government could work with charity representatives to produce guidance for local authorities on best practice in designing discretionary rate relief policies.

This collaborative approach to criteria would produce a degree of unified criteria and a best practice approach. While not eradicating the localised element of this taxation, promoting a best practice model may help to limit great differences and assist national organisations to obtain discretionary relief in multiple operational areas.
As a minimum measure, it is the recommendation of SCVO that the system of 80% mandatory should be maintained, with discretionary rates relief of 20% also being guaranteed in all local authority areas, despite increased funding pressures on local authorities. We also believe that new clarification on discretionary criteria will enable the situation to be reflective of the needs of charities while maintaining a degree of localism and enabling local authorities to be receptive to local needs.

Community and land

In addition to the aforementioned proposals for change, early consultation with the sector also highlighted some views around how business rates can best support the land reform and community empowerment agenda.

It is worth remembering that non-domestic rates are not a tax on business, but rather a tax on the occupation of land and property based upon the rental value of that land and property. For this reason, many organisations who are not businesses pay non-domestic rates.

The Land Reform Review Group considered that there is no clear public interest case in maintaining the current universal exemption of agriculture, forestry and other land-based businesses from non-domestic rates. The Land Reform (Scotland) Act 2016 makes provision for non-domestic rates to be levied on shootings and deer forests, but as yet the Scottish Government has not indicated that it will remove the exemptions for agriculture and forestry.

In light of this recommendation and following discussions with SCVO members in the community sector, it would be worthwhile exploring whether the exemptions for agriculture and forestry should be continued.

There are also calls from some in the sector for greater flexibility in terms of how local government promote social and economic development through vacant reliefs. Vacant, neglected properties and land stifles the potential of local communities to grow and improve. Some third sector organisations have pointed to the need for there to be a balance between vacant rate relief, and the need for local taxes to incentivise renewed investment and encourage re-use of land.

Additionally, as a longer term goal, Land Value Tax has a lot of support within those in our sector who work on community empowerment. The Mirrlees review of taxation also suggested that there was a strong case for land value tax.

A land value tax is seen as a way to stop speculation and the hoarding of land, to encourage land to be put to its best use, and to ensure that landowners pay their fair share in local taxes even if there is no property on their land. Whilst there are clearly some current issues around the registration of landowners at present, once such issues are resolved a land value tax could be another tool with which to widen the local tax base and ensure sufficient income for local services as well as preventing land being used as a tax-free asset.


We urge the Barclay Review to consider the valuable work charities do and recognise their impact on the lives of vulnerable individuals and communities across Scotland.

Funding remains a key concern within the third sector. An SCVO survey recently found that 38% of respondents report they are unable to confidently plan ahead given their current funding arrangements. For many charities, paying full rate relief is not an option. Any changes to the 80% mandatory relief, therefore, would lead many organisations to consider scaling back operations or closing their premises.

Relieving charities of business rates, whether entirely or partially, means that there will be more money available for those organisations to spend on achieving their charitable aim or supporting their community in general. It is clear that it is not only the charities themselves who benefit from rate relief but the local communities and vulnerable individuals.

Guidance for local authorities, designed in collaboration between Scottish Government, local government and charities, which encourages a more holistic view of the role of charities would a valuable step towards recognising the important role played by the third sector in Scotland. Charities ultimately have a valuable role in creating the social capital necessary to underpin strong communities and long-term economic growth.

In conclusion, therefore, we believe that business rates should be designed based upon the following principles:

  • Non-domestic rates should be progressive and be designed in a way that helps local communities to flourish
  • Non-domestic rates relief should be applied in a simple, transparent manner,so that relief is applied consistently and fairly
  • Non-domestic rates relief should encourage inclusive economic growth – rural areas, areas of deprivation, employment of people with disabilities, young people who are distant form the job market – and recognise the key role that charities play here, driven by local need not profit margins.
  • Non-domestic rates relief should encourage community- and environmentally-friendly behaviours
  • Non-domestic rates relief should empower communities to run and manage local assetsFor example, community land and asset transfers
  • Non-domestic rates relief should reflect the changing role of modern charities and social enterprises


Ruth Boyle, Policy Officer
Scottish Council for Voluntary Organisations

Tel: 0131 556 3882

About us

The Scottish Council for Voluntary Organisations (SCVO) is the national body representing the third sector. There are over 45,000 voluntary organisations in Scotland involving around 138,000 paid staff and approximately 1.3 million volunteers. The sector manages an income of £4.9 billion.

SCVO works in partnership with the third sector in Scotland to advance our shared values and interests. We have over 1,600 members who range from individuals and grassroots groups, to Scotland-wide organisations and intermediary bodies.

As the only inclusive representative umbrella organisation for the sector SCVO:

  • has the largest Scotland-wide membership from the sector – our 1,600 members include charities, community groups, social enterprises and voluntary organisations of all shapes and sizes
  • our governance and membership structures are democratic and accountable – with an elected board and policy committee from the sector, we are managed by the sector, for the sector
  • brings together organisations and networks connecting across the whole of Scotland
  • SCVO works to support people to take voluntary action to help themselves and others, and to bring about social change.

Further details about SCVO can be found at