FAQs: Starting a charity shop

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Starting a charity shop

Setting up and running a charity shop is a complex undertaking, and one which should not be entered into lightly: they are a good method of raising awareness and funds for a charity, but not a simple one. You will find that you are faced with the same issues as someone running a small business - such as security, health & safety and trading law - as well as problems specific to the sector, such as where to get your stock and your volunteer workforce. Step-by-step guidance follows below: there is more detailed information in the guidance on the KnowHow NonProfit website.

First steps
  1. Register as a charity with the Charity Commission, if you have not already done so. Only registered charities can set up charity shops.
  2. Familiarise yourself with the statutory obligations that come with being a retailer, charity, employer and occupier of property. There is guidance for business trading on the Ask Cedric website, with a special section on charity shops. There is more on employment law on the ACAS website.
  3. Familiarise yourself with the tax side of running a charity shop. Charity shops benefit from being exempted from corporation tax, zero rated VAT on the sale of donated goods, and 80% mandatory non-domestic business rates relief. Her Majesty's Revenue and Customs (HMRC) website has guidance on these issues, as does the Business Link website.
  4. Approach your local council, to arrange rates relief. Council details can be found on the DirectGov website.
  5. Create a budget for the shop, with likely income (from sales) and expenditure (from rent, wages, repairs, bills, insurance, etc.). Remember that 60-80% of a shop’s income will go to running costs, such as rent and wages.
  6. Raise your start-up capital. You will need at least £5,000 to pay the rental deposit, as well as for the shop-fit, essential building repairs and staff recruitment.
Setting up a shop
  1. Choose an area to set up your shop. You will need to be in a mixed income area with good footfall and nearby car parking.
  2. Find a property. The shop will need to have a good sized backroom for storage and stock preparation, as well as a nice public area. In order to comply with Health & Safety legislation and the Disability Discrimination Act (DDA) (www.equalityhumanrights.com), the shop will need to be safe, well lit, and accessible to those with disabilities.
  3. Fit the shop. The public area will need shelves, railings and a counter with a till, while the backroom will need storage and sorting facilities. A burglar alarm is highly recommended, along with other security equipment such as CCTV cameras.
  4. Hire a shop manager, with retail experience. They will be responsible for all the shop’s activities, including stock, volunteers and cash handling, as well as report writing on sales etc. N.B. Shop manager is usually a paid position.
  5. Find volunteers. You will need a minimum of two people working in the shop at all times, for safety, security, and stock processing. The average charity shop has 19 volunteers. N.B. Volunteers are only paid their expenses.
  6. Train your workforce, so as they know about your charity’s aims, retail law, product safety, stock preparation and spotting valuable goods, as well as issues like Health & Safety and Security.
Running a shop
  1. Encourage donations, whether through chatting to the public or doing house-to-house collections using donation sacks. There is more on your legal obligations in such collections on the Office of the Third Sector (OTS) website.
  2. Sort, clean and price your stock. Unsold textiles (i.e. too old or damaged) may be bought by a reprocessor, or ‘ragman’, who will recycle or export them. For more on textile reprocessing, visit the Textile Recycling Association website.
  3. Make sure the shop is a safe and secure place to be, and to work in. Paperwork – such as Risk Assessments – must be completed to prove this. Display the correct posters and notices, including: employer’s liability insurance certificate, Health & Safety law poster, employer’s Health & Safety policy statement, fire emergency instructions and the emergency aid notice. The Royal Society for the Prevention of Accidents website has more information.
  4. Make sure the shop is welcoming to disabled customers and volunteers, so as to comply with the DDA regulations. This involves practical things, like having a ramp over steps, as well as training staff on how best they can help.
  5. Make sure the shop complies with consumer law, and sells safe goods of satisfactory quality. Visit Trading Standards for further guidance.
  6. Apply for a music licence if desired.
Further information

The Association can recommend the following sources of information:

  • The Association has published a book written by John Tough, titled Setting Up and Running Charity Shops - an Essential Guide. This book contains practical guidance on how to get started and succeed in charity retailing. See further details or order a copy.
  • KnowHow NonProfit - www.knowhownonprofit.org - has information on many charity matters, including further guidance on setting up and running a charity shop.
  • The Charity Commission provides information on the legal aspects of trading, including operating under a trading subsidiary in their leaflet CC35 - Charities and Trading. Call 0845 300 0218.
  • Charity Finance Shops Survey is an annual survey of the charity retail sector published by Charity Finance. Call 020 7819 1200.

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Updated 22 July 2013