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: security, health and safety, trading law, in addition to problems specific to the sector, such as sourcing stock and your volunteer workforce. Step-by-step guidance follows below: there is more detailed information in the guidance on the KnowHow NonProfit website.
- Register as a charity with the Charity Commission, if you have not already done so. Only registered charities can set up charity shops.
- 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.
- 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.
- Approach your local council, to arrange rates relief. Council details can be found on the DirectGov website.
- 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.
- 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 charity shop
- 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.
- 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.
- 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. Security equipment is highly recommended.
- 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.
- 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 20 volunteers.
- 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 charity shop
- Encourage donations, whether through chatting to the public or doing house-to-house collections using donation sacks. There are legal obligations involved in house-to-house collections. We have provided member guidance on this.
- Sort, clean and price your stock. Unsold textiles (i.e. too old or damaged) may be bought by a textile recycler, who will recycle or export them. For more on textile reprocessing, visit the Textile Recycling Association website.
- 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.
- 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.
- Make sure the shop complies with consumer law, and sells safe goods of satisfactory quality. Visit Trading Standards for further guidance.
- Apply for a music licence if desired.
We recommend the following sources of information:
- 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.