The Charity Tax Group has prepared a briefing for officials at BEIS, MHCLG and HM Treasury proposing that the eligibility criteria for the Small Business Grants Fund be amended to allow charities to make a claim where they would be have been eligible to claim for Small Business Rates Relief, had they not claimed mandatory charity business rates relief.

A small change to the rules could unlock important funding for small charities unable to access many of the Government’s business support measures. It is proposed that the associated costs would be allocated from funds already provided to local authorities by central Government, with the result that there would be no additional cost to the Exchequer. This measure and proposal applies to England only.

On 2 May 2020, the Government has announced that an additional £617 million of grant funding will be made available for distribution by Local Authorities. This additional fund is aimed at small businesses with ongoing fixed property-related costs. Local Authorities are being asked to prioritise businesses in shared spaces, regular market traders, small charity properties that would meet the criteria for Small Business Rates Relief, and bed and breakfasts that pay council tax rather than business rates. But local authorities may choose to make payments to other businesses based on local economic need. The allocation of funding will be at the discretion of local authorities. Businesses must be small and able to demonstrate that they have seen a significant drop of income due to Coronavirus restriction measures. There will be three levels of grant payments. The maximum will be £25,000. There will also be grants of £10,000. Local Authorities will have discretion to make payments of any amount under £10,000. It will be for councils to adapt this approach to local circumstances.

Asked for comment by the press, CTG Chairman John Hemming said: “Small charities have expressed frustration that the £10k Small Business Grant Fund is only open to organisations claiming Small Business Rates Relief and not those claiming mandatory charity rates relief. This is despite the fact that many small charities have properties of an equivalent size and have been equally affected by the COVID-19 shutdown and the associated loss of income. CTG, working with sector partners, proposed a tweak to the current rules to allow small charities to claim the grant. With current allocation of the grant funds lower than anticipated by Government, we argued that this pragmatic step could deliver urgent financial stimulus to small charities, at no extra cost to the Exchequer. The announcement that charity properties can be eligible for this additional grant fund is very welcome. While this funding is at the discretion of local authorities, this is a positive announcement for small charities that should ensure some are able to access funding that has unattainable to date. Charities are encouraged to look out for application forms being published by their Local Authorities and to contact them to demonstrate their need for this funding”.

On 13 May 2020, BEIS published additional guidance for local authorities – full details can be found here.

More information on the Small Business Grant Fund, Expanded Retail Discount and Retail Hospitality and Leisure Grant Fund can be found here. CTG also manages a detailed COVID-19 Information Hub for charities, including information on the Job Retention Scheme.

Small Business Grant Fund – Proposal by the Charity Tax Group

Small charities are unable to claim the Small Business Grant Fund (SBGF), a helpful one-off £10k cash grant introduced to support small businesses during the COVID-19 crisis. This is because SBGF is only available to organisations that are in receipt of Small Business Rates Relief (SBRR) and Rural Rates Relief (RRR).  A usual pre-requisite for claiming SBRR is that you are not in receipt of any other mandatory rates reliefs (including charity reliefs). It almost always makes sense for charities to make use of this mandatory relief (and in some cases discretionary relief) so there is no need to claim SBBR. However, excluding charities from accessing the SBGF means that they are now seriously disadvantaged compared to other small businesses, despite having properties of comparable size. Some charities can claim under the Retail Hospitality and Leisure Grant Fund (RHLGF), but this is limited to charity shops, museums, galleries, theatres, sports clubs etc. This means that many small charities are excluded from Government grants, despite having to close during the lockdown.

We note that as of 27 April 2020, approximately £7.6bn of the £12.3bn allocated to local authorities for the grant funds had been awarded (61%). This equates to 614,000 grants, from an anticipated 965,000 eligible hereditaments. We are aware that local authorities have been working very hard to award these grants, which provide vital support to those organisations that need them. Despite this, it currently seems unlikely that the full £12bn of grants will be claimed (in part due to state aid limits), with the result that local authorities may be liable to reimburse funding allocations to central Government.

This would be a real shame given that there are many small charities that could make use of the £10k SBGF. The charity sector is calling on the Government to make use of funds allocated to local authorities, but which they are unable to award, to support small charities, many of which are unable to access many of the other Government support packages. Sufficient funding is currently held by local authorities and could be distributed quickly to charities in desperate need of a financial stimulus.

This could be achieved by tweaking the eligibility criteria for SBGF to allow charities in receipt of mandatory rates relief to claim, where they would otherwise meet the SBBR eligibility criteria:

• the charity’s main property has a rateable value of less than £15,000; and
• where a charity has multiple properties
  • none of the other properties have a rateable value above £2,899;
  • the total rateable value of all their properties is less than £20,000 (£28,000 in London).

As per the current SBGF rules, charities in receipt of the RHLGF would not be eligible. This would be an exceptional provision, tied only to the Small Business Grant Fund and charities in receipt of mandatory relief would not be able to claim SBRR in future.

Charity infrastructure bodies are commissioning a survey of small charities to better quantify the cost of this proposal, but we wanted to raise it urgently with officials, given the pressures on local authorities to allocate funding awarded by central Government. In the meantime, Community Matters Yorkshire have provided an estimate for the number of charity properties likely to fall within this expanded definition, with the data provided below. As the estimates below indicate, the cost would be a fraction of the funds remaining to be allocated by local authorities.

Local authority	No. of Charities receiving mandatory rates relief*	Charities with RV <£15k	Cost	Grant funding remaining**
Leeds	1147	250	£2,500,000	£50,589,000
Wakefield	471	100	£1,000,000	£22,544,000
Kirklees	492	100	£1,000,000	£48,350,000
Bradford	847	200	£2,000,000	£64,464,000
Calderdale	375	80	£800,000	£20,570,000

* As per MHCLG NDRR tables

** As per BEIS data on Local authority grant payments

We recognise that the Chancellor has announced a £370m fund for small and medium sized charities, which is due to be distributed by National Lottery Community Fund and other partners. Details of this fund are still to be confirmed, but we understand that it will support locally-focused charities doing most during the outbreak – such as delivering food and medicines and providing financial advice. While this work is very important, it means that other local charities, not directly involved in COVID-19 relief, but equally impacted by the lockdown and drastic reductions in income face severe financial pressures. While some of these charities will be making use of the Job Retention Scheme and furloughing employees, this does not work for all small charities and does not cover other fixed costs such as rent, service charges and utilities. Once the details of the £370m charity package are known, it could also be reasonable to exclude any charities that are in receipt of funding from that scheme exceeding £10k.

The briefing was prepared by the Charity Tax Group with support from the Charity Finance Group and NCVO. The proposal is also supported by the Small Charities Coalition, NAVCA and other local and community infrastructure charities. If you would like to demonstrate your support for this proposal, please contact info@charitytaxgroup.org.uk or call 02072221265.