The Supreme Court has recently given an important judgment on the approach to mandatory relief from business rates for charitable organisations, in the case of London Borough of Merton Council v Nuffield Health [2023] UKSC 18.
Mandatory relief is a national government scheme, which provides relief on the business rates of registered charitable organisations. Under Section 43(6) of the Local Government Finance Act 1988, ratepayers are granted a mandatory 80% relief from non-domestic rates on a property occupied by an eligible organisation, if it is 'wholly or mainly used for charitable purposes'. Such purposes could be carried out by that charity in particular, or by that charity in conjunction with other charities.
Until the judgment on 7 June 2023, there had been a considerable amount of ambiguity in case law about the meaning of the phrase 'wholly or mainly used for charitable purposes'. The Supreme Court has clarified its interpretation of this, providing a wide-ranging view of the principles applicable to determining how the public benefit requirement is met in the context of business rates relief.
What is considered as a 'charitable purpose' when it comes to business rate relief?
Nuffield Health is a registered charity, whose charitable purpose is to 'advance, promote and maintain health and healthcare of all descriptions and to prevent, relieve and cure sickness and ill health of any kind, all for the public benefit'.
Nuffield Health pursues its objectives primarily through the provision of gym facilities across the UK, including a gym located at Merton Abbey, the property at the centre of this case. This gym was acquired by the charity in August 2016, shortly following which the London Borough of Merton, the Appellant, considered that relief from business rates should not apply.
When this was brought to the High Court, the issue at hand was whether the services provided at this particular gym were for the public benefit in circumstances where the gym is exclusive with a monthly subscription of circa. £80 per month with little or no meaningful provision to be made for those who could not afford the subscription. The High Court found in favour of Nuffield Health.
The London Borough of Merton appealed to the Court of Appeal, and argued that the use of the gym located at Merton Abbey should be considered separately from any other of the charity's properties, and that it must qualify on its own as a 'use' for charitable purposes. The appeal was dismissed in the Court of Appeal.
On 7 June 2023, the Supreme Court also unanimously rejected the council's approach, by finding that Nuffield Health does use the gym located at Merton Abbey for charitable purposes, and is therefore entitled to receive the mandatory 80% relief from business rates.
The Supreme Court said that where the public benefit requirement is met, all of the activities of the charity can be said to have been carried out for public benefit. This is because in public benefit in charity law is examined by reference to the purposes of the charity and the manner in which the body fulfils their charitable purpose. The Supreme Court, in its judgment, noted that 'Parliament intended the relevant analysis should proceed by reference to the general law of charity. That law assesses whether a body's purposes are charitable by looking at its purposes and activities overall, not on a site by site basis'. Accordingly, as Nuffield Health is a registered health charity and was using the Merton Abbey gym for the direct fulfilment of its charitable purposes, it was entitled to benefit from business rate relief.
What has the new ruling on charitable business rate relief clarified?
In dismissing the London Borough of Merton's appeal, the Supreme Court has provided some much sought after clarification to the approach to Section 43(6) of the Local Government Finance Act 1988. They explained that the analysis as to the public benefit requirement in this context should be approached in two stages.
Firstly, it must be considered whether the ratepayer is a charity or not. If it is registered, the first condition will be satisfied, since under section 37(1) of the Charities Act 2011, the ratepayer is conclusively presumed to be a charity at any time when it is or was on the register. If the ratepayer is not registered, then it must be considered whether it meets the test for charitable status. That is, a charity with purposes that fall within section 3(1) of the Charity Act 2011, and are for the public benefit, as defined in section 4 of the same Act.
Secondly, whether the property is being used for the charitable purposes of the charity. This is a factual analysis, and not a question of law.
This is a significant decision in the charity sector, given that the public benefit requirement has not been considered in Upper Tribunals in detail since the case of R (independent Schools Council) v Charity Commission [2012] Ch 214 in 2012. This recent decision confirms that registered charities who operate over a variety of different sites will not have to demonstrate that the activities on each of those sites would have in their own right qualified as a charity, in order to obtain relief.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
