What fun on charity shops!

The number of charity shops on the high street should be curbed because they cost the Government more in tax breaks than they make in profits, a new report says.

Hmm, mebbe so. But from the report this is interesting:

The US charity, Goodwill Industries6, which runs 3,000 charity shops, manages to convert
83% of overall income into profit for charitable activities. The majority of Goodwill
Industries’ income derives from its charity shops

True, so far as it goes. But Goodwill counts the cost of running its shops as part of its charitable activities. Because that’s where they do the training for people to move onto other jobs.

9 thoughts on “What fun on charity shops!”

  1. “…that’s where they do the training for people to move onto other jobs.”

    That’s those ultra-efficient Yanks, though. Over here, charity shops are mostly staffed by volunteers, usually retirees.

  2. Charity shops pay much lower business rates. But presumably the incidence of this tax break falls on the landlord, not the charity. That’s reason enough to scrap it.

  3. Bloody awful report though. They estimate the business rates break at between £65m and £1,350m. It’s hard to make a recommendation when the key figure could be out by a factor of 20.

  4. Andrew: Nope. Business rates falls on the business, not the property owner. The clue is in the name.

  5. What dreadful person put this together?

    “The study from the True and Fair Foundation, which campaigns for more efficiency in the charity sector, found thousands of charity shops were on average less profitable than some high street retailers despite benefitting from an extensive network of volunteers, free donated goods and 80 per cent off business rates.”

    So there’s not much money in second hand goods. Colour me shocked.

    “The mandatory 80 per cent minimum business rates relief for charity shops should be reduce led by 10 per cent a year to 50 per cent a year in three years’ time.

    “This would reduce the unfair playing field for other high street operators and dampen the rate of growth in store openings.”

    Or just lead to more empty shops. Because if any other business can make more of a profit from those premises, the landlord would have had them in and bumped the rent up. If he’s any good at all.

    It’s quite interesting to find out about how charity money is spent, sure. On the other hand, I doubt many charity shop customers would care if they only made 1% profit, because they get some cheap stuff out if it anyway.

    It’s a bit unseemly, this keenness to drive charity shops off the high street.

  6. True and Fair Foundation … The name leads me to believe they are “fair and balanced” according to their own definitions.

    Quite simply someone created the numbers they wanted to prove their point. Who would benefit from closing down high street charity shops?

  7. jgh,
    The business pays it, but the burden of the tax is borne by the landlord since in the absence of such a tax he would raise his rents. Just as employers’ National Insurance falls squarely on the employee, even though it’s paid by the employer. Look up “tax incidence” on this new-fangled internet thing.

  8. @NielsR, March 5, 2016 at 4:30 pm

    Or just lead to more empty shops. Because if any other business can make more of a profit from those premises, the landlord would have had them in and bumped the rent up. If he’s any good at all.

    Wrong. The landlord doesn’t care who leases the property (within reason) as long as the landlord receives payment.

    The charity shop staffed by volunteers has to make enough gross profit to cover the fixed costs and their business rates are 20% of any other trader.

    Meanwhile, the non-charity has to make enough gross profit to cover the fixed costs including business rates at 100% plus staff costs.

    Morningside in Edinburgh is a good example of this, as leases come up for renewal charity shops – due to their rates subsidy – our offering landlords higher rents than the incumbent trader can afford. Profitable businesses employing people have and continue to close due to this subsidy – including national companies such as Thomas Cook, Specsavers and Pizza Express.

    Many have made it clear with a poster in their window explaining they are closing after xx years due to a subsidised charity offering the landlord a higher rent.

    Morningside is now a Charity shop dominated retail area.

    imho Charities should not receive subsidies (gift-aid, rates, Gov’t grants etc), they should exist solely on donations from the public.

  9. @pcar, that is shocking. I assumed that the lower profit was based on paying the same rent. Hadn’t expect them to offer an above market rent, as well.

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