Charity may not begin on the High Street

Michael Fahy examines the practice of retailers paying charities to sign tenancy agreements for empty shops.

If you go down to your High Street today, you’re sure of a big surprise as many of the previously empty units are no longer empty – or are they?

A recent investigation by the Financial Times has revealed that retailers are paying charities to sign tenancy agreements for empty shops in order to reduce their business rates liabilities. There has been a suggestion that some of the charities are not in fact occupying the units for retail purposes but merely using them as advertising space.

From 01 April 2011, the empty property business rates threshold reverted to £2,600 from the previous level of £18,000. As a consequence, businesses have resorted to paying charities to sign tenancy agreements for their empty properties as charities receive an 80% tax relief from business rates. For many businesses, these charitable ‘donations’ are more affordable than the full business rates that would otherwise be due.

This practice may well be on the rise given that one in seven high street shops are currently unoccupied. The Financial Times named a number of businesses that are reducing their tax liabilities in this way.

The Department for Communities and Local Government has stated that such practice is a form of tax evasion and that business rates relief for charities are meant to be a reflection of the wider public benefit that charities provide to society.

This practice may not be a win/win for charities as the Charity Commission has stated that, in conducting its investigation, it will consider whether charity trustees are making proper decisions to occupy property to further charitable purposes, and that any benefit to the landlord is incidental to that.

Some charities may find that the old adage that “there is always free cheese in a mousetrap” may apply to this instance.

Michael Fahy is head of Real Estate at Steeles (Law) LLP. He can be contacted on email at This email address is being protected from spambots. You need JavaScript enabled to view it. or by telephone on 0207 539 4307.