Umbrella bodies have urged the government to protect the £1.46bn business rates relief for the charity sector, following confirmation in the Budget of a “wide-ranging” review of the system.

Charities are currently able to apply to local authorities for relief of up to 80 per cent on business rates on any property they occupy. For 2013/14 this came to £1.44bn and will rise to £1.46bn in 2014/15 across the sector.

There are also reliefs for other things such as small businesses and empty buildings. A consultation paper published on Monday by the Treasury said: “The government wants to consider whether each relief and exemption is achieving its intended aim in the most effective and appropriate way.”

It added: “The government does not intend to increase business rates for those most deserving of relief or exemption and it wants to consider carefully the impacts of any change.”

Business rates are based on the value of the property and set by local councils in England, Wales and Scotland, and apply to most non-domestic properties. The current system was introduced in 1990 and many small businesses are concerned that the growth of internet-based business mean that they pay an unfair proportion compared to some larger companies.

The government’s policy paper says that “major changes have taken place to the way that people in the UK work, live and shop”, and that: “This, in turn, has contributed to changing patterns in the occupation of non-domestic property, on which business rates are payable.”

These changes include working from home and hot-desking. The aim of the review is to make the system “simpler, more transparent and easier to deal with”.

John Hemming, chair of the Charity Tax Group, said: “Although there have been reassurances that the business rates review is not targeting charities, we will be working with others across the sector to ensure that this vitally important relief for charities is protected.”

In a blog yesterday, Michael Birtwistle, senior policy officer at NCVO, said: “The consultation paper recommends no changes to the existing exemption for charities, but there are potential implications for local government income, which could have a knock-on effect for voluntary sector organisations. We’re of the view here that this is really important: business rate relief is hugely significant to a wide range of charities.”