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Last Updated: Thursday, 13 March 2008, 12:10 GMT
Changing times for charity gifts
Charity shop
Charity shops are a common sight on the High Street
Charity groups have expressed relief at avoiding a big cut in income in Chancellor Alistair Darling's Budget.

Charities had warned that next month's new lower income tax rate could cost them 90m a year in lost gift aid.

But the chancellor announced a transitional rate which would leave the benefit unchanged for three years.

Bill Dodwell, at accountancy firm Deloitte, said this delay was worth an extra 300m to charities over the next three years.

But many charity groups say they face other challenges, with many shops looking to online sales and specialist services to raise money for good causes.

Budget reprieve

Gift aid allows charities to reclaim the tax paid on one-off donations.

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When the basic rate of income tax falls from 22% to 20% on 5 April, charities faced a subsequent dip in the amount they could reclaim.

At present, including gift aid means every 1 donated is actually worth 1.28 to charities.

This would have dropped to 1.25 under the new tax levels, but the chancellor announced that the current 22% rate would apply for gift aid for the next three years.

'Welcome move'

Mr Dodwell said: "The change is especially welcome, as it has been very hard for charities to explain easily to their donors why they lost money through the basic rate reduction."

This will give charities a chance to adjust to the new lower rate
John Low, CAF chief executive

John Low, Charities Aid Foundation (CAF) chief executive, said: "It is a huge relief as we feared charities were going to lose in excess of 90m a year when the basic rate of tax comes down next month.

"This will give charities a chance to adjust to the new lower rate."

Future challenges

Around 6,800 of the estimated 7,000 charity shops in the UK come under the umbrella of the Association of Charity Shops.

Charity shop
Challenges remain for charity shops in the future

Its members raised 110m from a turnover of 550m in 2007.

Textiles dominated merchandise at 60% of total sales, to a predominantly female customer base.

Average rents have risen by nearly 18% to 17,794 in 2007 compared with 2003 and so charity shops, like the rest of the retail market, are having to adapt.

"Many are now remote sellers, using sites such as eBay as well as their own online selling," said David Moir, spokesman for the association.

More and more shops were specialising in sectors such as furniture, electricals and retro clothing, he added.

Many charity shops are setting a trend for reducing plastic bag use, another of the chancellor's wishes.

Yet theft remains one of their biggest challenges. A broad estimate suggests charity shops can lose between 5% and 10% of turnover owing to theft, compared with 1.33% for commercial retailers.

One theory is that charity shops are unable to afford crime prevention equipment such as tagging and CCTV, making them an easier target for opportunist thieves than other High Street stores.



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