A registered charity's particular use of a property will not be scrutinised by the courts when the court is determining if a property occupied by a charity is eligible for charity business rates relief. Where a charity occupies a property, and occupies a portfolio of properties, the courts have clarified that when interpreting the business rates legislation, they will take the overall charitable purpose of the charity into account, and not single out the use of a particular property in isolation.
The Court of Appeal has rejected an appeal by the London Borough of Merton challenging Nuffield Health’s eligibility for business rates relief over a former Virgin Active Gym acquired by Nuffield Health in August 2016.
Nuffield Health is a company limited by guarantee and a registered charity. Their charitable objects are “to advance, promote and maintain health and healthcare of all descriptions and to prevent, relieve and cure sickness and ill health of every kind, all for the public benefit”. They own a large portfolio of properties comprised of 31 hospitals, 112 fitness and wellbeing centres and five medical centres, and Nuffield Health operate over 200 gyms and health assessment facilities in workplaces across the United Kingdom. The primary source of revenue for Nuffield Health is from the fees it charges for its exclusive services.
The London Borough of Merton (LBM) submitted that section 43(6) of the Local Government Finance Act 1988 should be interpreted to require an applicant to show “that the Premises were used for the public benefit as an aspect of showing that they were used wholly or mainly for charitable purposes. And that a charity has to show that its use of a particular property is for the public benefit.” Lord Justice Peter Jackson was surprised that “such a fundamental issue of principle has not arisen before”, and described LBM’s argument as “curiously unprecedented”.
The Court ultimately decided that when interpreting the legislation which provides the mandatory relief for charities from business rates and applies where “the ratepayer is a charity or trustees of a charity and the hereditament is wholly or mainly used for charitable purposes (whether of that charity or of that and other charities)”, Parliament’s intention was not that the question of public benefit should be assessed separately for each site on which a charity carries out its charitable activity.
Lord Justice Peter Jackson concluded by cautioning that even though Nuffield Health had succeeded under the rating legislation, if the situation at the premises were replicated across all its properties, it may face scrutiny from the Charity Commission, and then potentially the courts.
Charity business rates relief
Charities are able to apply for business rates relief of up to 80% if a property is used for charitable purposes. A discretionary relief which tops up the discount to 100% is available, and charities should contact their local council to determine if they are eligible for the full 100% discount. It is highly advisable for a charity to check their rates position in advance of entering into a lease, particularly if they are not clear what level of relief they will be eligible for.
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