Thrift has become a strong source of uplift in charity income again

The impact of COVID-19 lockdowns has meant that many charity trading subsidiaries may now be making significantly reduced profits or even losses.

One of the quickest ways of injecting cash into a charity, and a vital source of 'unrestricted income', which means it can be spent on anything by the charity, is the charity shop.

The good news is that charities have reported a strong return to trading for their high street outlets as lockdown restrictions on non-essential retail eased. This has been driven, not least, by high levels of new stock as people donate large volumes of belongings stored up during lockdown. 

And with heightened sales comes opportunities to increase income by making the money from charitable trading work harder as well as to protect the funds you already have. Both are laudable and essential goals which have been helped by Government initiatives for (charity) retailers during the pandemic and these remain in place.

There's support for businesses that pay little or no business rates, for example. The revaluation of business rates in England planned will no longer take place in 2021 and as a result the expanded retail discount scheme will mean that for eligible charity properties, the scheme should remove any business rates due above the 80% charity relief.

There are also existing tax exemptions and benefits to be had when operating a trading subsidiary, similarly so for rental income from a charity property and of course there is Gift Aid.

HMRC has stated that if the Gift Aid payment leaves the subsidiary with a taxable profit, it will have a tax liability to be paid nine months and one day after the year end. However, if the next financial year is loss making, the losses can be carried back and offset against this liability. This will of great help to many charities.

At GSM we can provide valuable information for Trustees and charity retail management to encourage competitiveness and focus attention on the key financial areas of your charitable trading to better inform your decision making, including information on wage costs, Gift Aid, average price paid, average transaction value; paid and volunteer hours used per week and so on.

To hear more of what over 100 years of charity accountancy experience can bring to your charity trading subsidiary and your charity as a whole, contact us today to arrange a no-obligation meeting on 020 7935 3793