What Does The New Landmark Judgment On Charitable Relief From Business Rates Mean For Charities?

• Published date: 21 June 2023
• Subject Matter: Corporate/Commercial Law, Food, Drugs, Healthcare, Life Sciences, Charities & Non-Profits
• Law Firm: Thomson Snell & Passmore
• Author: James Parratt

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...