Mandatory relief against non-domestic rates on properties in England and Wales will be granted where the property is occupied by a charity and is “wholly or mainly used for charitable purposes". This is set down in statute under Section 43(6) Local Government Finance Act 1988. But, what happens in the case of a charity with many properties – are the charitable purposes understood by reference to the body as a whole or does each property have to be taken on a case by case basis? The Supreme Court has now answered this question once and for all in LB Merton v Nuffield Health [2023] UKSC 18

The Issue

Nuffield Health was a registered charity, which operated some 31 hospitals, 112 fitness and wellbeing centres, 5 medical centres and over 200 further gyms and health assessment facilities in workplaces across the UK for the purposes described in its Memorandum of Association: “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.”

One of its facilities was a members-only gym known as Merton Abbey, located in the London Borough of Merton.

Merton Council took the view that the Merton Abbey gym failed to qualify as being used for charitable purposes, because the membership fees were too high to permit those with modest means from using it and therefore, the public benefit test for charitable status was not met. It also asserted that the property in question should have to qualify on its own under the status of "charitable purposes".

Notwithstanding the finding that member fees were not in fact excluding those with modest means, the Supreme Court considered there to be a two-stage approach to determining whether a party should be entitled to charitable rates relief: 1) that the question of whether a body is or is not a charity turns on whether its purpose or purposes satisfy the public benefit requirement; and, if so, 2) then regard must be had to the manner in which the body fulfils the relevant purpose or purposes overall, rather than whether it does so in any particular place where its activities are carried on.

The test for Rates Relief

On the second part of the test, the SC said it was a factual question and nothing to do with charity law. It stated:

"The purpose or purposes of the charity will usually be apparent from its constitution, or (if registered) by a simple online inspection of the register maintained by the Charity Commission. The question whether that purpose or those purposes are fulfilled by the sole or main use of the hereditament is a factual matter, and will not require the rating authority to don the cloak of the Charity Commission or the robe of the Chancery judge to decide whether those purposes are charitable" (para 55).

Any approach by an authority to undertake its own (second) charity analysis, was wrong.

A body's charitable purposes are assessed by looking at its purposes and activities overall, not on a site-by-site basis. Charities operating across many facilities will therefore not be required to satisfy this for each of its sites.

Following the Supreme Court's decision, we would expect Scottish Courts to take the same approach given the similarities in the legislation between the two jurisdictions. 

If you are a commercial landlord or tenant dealing with non-domestic ratings, or you require advice about these issues and how they may impact you or your business, please do not hesitate to get in touch with our Real Estate Disputes team or your usual Brodies' contact.