Council run organisations will continue to receive charity tax breaks

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The Scottish Government has announced it will not follow a recommendation to make Aleos pay higher rates

29th November 2017 by Gareth Jones 0 Comments

The Scottish Government has announced it will not be stripping council run charities of controversial tax breaks.

A year-long probe into Scottish business rates by former RBS chairman Ken Barclay made 30 recommendations and found no justification for private schools or so called arms-length external organisations (Aleos) of councils to continue receiving preferential business rates. 

The Barclay report accused Aleos of “tax avoidance” by claiming charitable status - and said that £50 million of additional tax income was being missed out on.

However finance secretary Derek Mackay announced on Tuesday that he would not be following the review’s recommendation to remove the special status for Aleos - which include sports services, theatres, libraries, museums and galleries. Organisations such as such as Glasgow Life and Edinburgh Leisure are some of the biggest recipients of charity rates relief in Scotland.

Mackay said: “We are committed to an active and healthy Scotland with a vibrant cultural life and we will continue to support local authorities in providing affordable ways for their communities to take part in culture and leisure activities.

“In my response to the Barclay review I made clear that this was a recommendation that I wished to engage on before coming to a conclusion. In these discussions I have heard a strong and consistent message about the importance of this benefit to sports and leisure facilities and to keeping the costs of these services affordable especially in disadvantaged and vulnerable communities.”

John Downie, director of public affairs for the Scottish Council for Voluntary Organisations (SCVO), called for action to be taken to remove charity status – and its benefits – from Aleos.

"This decision flies in the face of the Barclay Review which clearly said there was no justification for Aleos to continue receive charitable rate relief,” he said. “Aleos are part of government, not real charities, and they should pay their dues.

“This whole debacle shows the urgent need for the 2005 Charities Act to be reviewed. Aleos and private schools need to be stripped of charitable status, so that this kind of tax avoidance by organisations who are not carrying out charitable work can be avoided."

However the announcement was welcomed by those representing leisure bodies. Robin Strang, chief executive of West Lothian Leisure and chair of Sporta Scotland, said the announcement was welcome.

He said: “This announcement will give a welcome boost to our members’ determination to continue delivering against the sporting and cultural objectives we share with the government.”

Anthony McReavy, chief executive of East Renfrewshire Culture and Leisure, said: “We continue to face real financial challenges, however this proposal by the Barclay review was always going to have real and damaging unintended consequences. The cabinet secretary is to be commended for appreciating that and dropping this proposal.”

Mackay made no mention of private schools in his statement, but added that he would take measures to mitigate rate relief for councils which plan to expand Aleos.