June 8th, 2023 by James Goudie KC in Council Tax and Rates

MERTON LONDON BOROUGH COUNCIL v NUFFIELD HEALTH (2023) UKSC 18 concerns Sections 43(5) and (6)(a) of the LOCAL GOVERNMENT FINANCE ACT 1988 and the interaction between rating law and charity law. Section 43 provides for a mandatory 80% relief from business rates when the ratepayer is a charity (or trustees for a charity) AND the hereditament is “wholly or mainly” used for “charitable purposes”. Nuffield Health is a registered charity. It has a members-only gym in the Council’s area. The decision was that Section 43(6) does NOT require the question whether the premises were used for charitable purposes to be decided by reference to the activities carried on there alone. Rather, the question was whether Nuffield Health was using the Merton Abbey gym for the pursuit of its charitable purposes, viewed in the context of its charitable activities AS A WHOLE. Applying that test Nuffield Health succeeded, EVEN IF persons of modest means were excluded from using the facilities at the Merton Abbey gym by reason of the fees charged there.

The Supreme Court addressed:-
(1) The History of the Applicable Law: paras 12-12 inc;
(2) The Principles of Charity Law relevant to the construction of Section 43(6): paras 22-32 inc;
(3) The Principles of Rating Law relevant to the construction of Section 43(6): paras 33 and 34;
(4) The Principles of Statutory Construction: paras 35-38 inc;
(5) Authorities on Section 43(6), its Predecessors and Equivalents: paras 39-44 inc;
(6) Construing 43(6): paras 45-62 inc; and
(7) The Application of Section 43(6) to the Facts: paras 63-66 inc.

The Supreme Court said in relation to House of Lords authorities on the effect of the formula now used in Section 43(6), GLASGOW CORPORATION v JOHNSTONE and OXFAM v BIRMINGHAM COUNCIL: –

“43. These authorities indicate that in order to qualify for relief under the statutory formula, the hereditament must be wholly or mainly used directly for activities which constitute the carrying out of the charitable purposes of the charity or, by a modest extension, for activities which directly facilitate or are wholly ancillary to the carrying out of those purposes.

44. …in our judgment the activities carried on by Nuffield Health at Merton Abbey gym were directly for the fulfilment of its charitable purpose of promoting health through exercise, within the core sense of the term, without need to rely on the extended sense laid down in the Glasgow Corpn and Oxfam cases…”

“53. …a charity cannot have non-charitable purposes, but can carry on other intra vires incidental activities, such as fund raising, head office management, investment and the provision of staff accommodation…”

The Supreme Court continued:-

“55. The same interpretation also tends to serve the statutory objective of providing a generally simple, predictable and consistent answer to the question whether a charity ratepayer should have relief from business rates, depending upon its sole or main use (or prospective use) of the hereditament, as recommended in the Pritchard Report. At least it does so better than Merton’s interpretation, when there is no issue as to whether the ratepayer is a charity. All that the rating authority has to do is to ascertain what is or are the (necessarily charitable) purposes of the charity, and then decide whether in fact the sole or main use of the hereditament is in furtherance of those purposes, or sufficiently closely connected with their fulfilment. 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.

56. The position is not so simple where the ratepayer claims to be a charity but is not registered as such. Non-registration does not necessarily mean that the ratepayer is not a charity and in such a case the rating authority would have to conduct a conventional charity law analysis of that question, having regard to the terms of the ratepayer’s written constitution or, if there is no written constitution or the written constitution is not decisive, to the actual facts about the whole of the ratepayer’s activities. That enquiry would of course reveal the ratepayer’s purposes, and they would all have to be charitable if the ratepayer was to be regarded as a charity…”

“58. In the context of Section 43(6) (and its predecessor, Section 11 of the 1961 Act), it is clear that Parliament did not intend that a counter-factual analysis should be adopted. On the contrary, it intended that the relevant analysis should proceed by reference to the general law of charity. The law assesses whether a body’s purposes are charitable by looking at its purposes and activities overall, not on a site-by-site basis. To try to apply Section 43(6) by employing a site-by-site analysis as Merton contends would involve a departure from, not the application of, the approach applied under the general law of charity.”

The case concerned a health charity, but it is clear that the same principles are to be applied to an education charity.


Public Benefit Requirement

May 30th, 2022 by James Goudie KC in Council Tax and Rates

The Supreme Court has, on 27 May 2022, given the Council permission to appeal in the important case of Merton LBC v Nuffield Health. The case is on qualifying for mandatory charitable relief from non-domestic rates. The majority of the Court of Appeal, (2021) EWCA Civv826, held that the question of public benefit does not need to be assessed separately for each site on which a charity carries out its charitable activity.


Rate Relief

May 28th, 2021 by James Goudie KC in Council Tax and Rates

The issue in Nuffield Health v Merton LBC (2021);EWCA Civ 826 was whether Nuffield Health, a registered charity, was entitled to mandatory relief from non-domestic rates in respect of its occupation of fitness and well-being centres, notwithstanding that membership fees at market rates were payable. The statutory basis of the claimed relief was that (1) it was a charity, as Nuffield Health is, or the trustees of a charity, AND (2) the hereditament was used “wholly or mainly for charitable purposes”, as defined in the Charities Act 2011, that is “for the public benefit”. The Court considers the public benefit test.


Liability for Rates

May 14th, 2021 by James Goudie KC in Council Tax and Rates

Hurstwood Properties v Rossendale BC (2021) UKSC 16 relates to the attempted avoidance of liabilities for business rates on unoccupied properties. The Supreme Court concludes (para 49) that the persons entitled to possession of an unoccupied property on whom the liability for rates is imposed does not encompass a company “which has no real or practical ability to exercise its legal right to possession” and “:on which that legal right has been conferred for no purpose other than the avoidance of liability for rates.”


Rateable Occupation

April 20th, 2021 by James Goudie KC in Council Tax and Rates

In R (SoS) v Harlow District Council (2021) EWHC 909 (Admin) Kerr J sets out, in Annex A, a checklist of 12 propositions of law as to when premises are occupied for rating purposes, and, in Annex B, a 13 item Protocol for resolution of disputes about occupation of premises.


Rating List

August 5th, 2020 by James Goudie KC in Council Tax and Rates

An alteration to the rating list which consists of the deletion of an hereditament can be made for a temporary period ending when the circumstances which justify the deletion cease to exist. It cannot however be restored with a different rateable value that is not within the scope of the ratepayer’s deletion proposal. So held in Sykes v Great Bear Distribution Ltd (2020) UKUT 238 (LC ).


Rates Avoidance Schemes

August 3rd, 2020 by James Goudie KC in Council Tax and Rates

Appeal in the cases noted in this Bulletin on 6 November 2019 have been dismissed : (2020);EWCA Civ 1017. Asplin LJ said at para 46 : “ … the authorities do not support the proposition that a transaction should not be regarded as genuine or a scheme should be considered to be contrary to the public interest on the grounds that their effects might be considered by some to be socially reprehensible.” At para 48 she said : “ Nor can it be relevant that each of the sequence of events is pre-determined…the pre-determined use of an SPV to which assets are transferred is a familiar feature in many corporate reconstruction schemes. Taking time in advance, to decide which steps to take, cannot of itself render the steps themselves contrary to the public interest.” At paragraphs 54-57 she said that once it is accepted that a step is genuine and not a sham, “ it cannot be undermined by the motive behind its creation.” The fact that the purpose for which a transaction has been entered into can be characterised as artificial in no way invalidates the transaction if it is not a sham. The fact that a device has been adopted in order to avoid legislative consequences cannot be taken into account in construing a document to find out what the true nature of the transaction is. One has first to find out what is the true nature of the transaction and then see whether and if so how the legislation operates upon that state of affairs. Floyd and Newey LJJ agreed.


Rateable Occupation

May 21st, 2020 by James Goudie KC in Council Tax and Rates

ATMs installed inside and outside supermarkets and shops are not separate hereditament. They remain in the rateable occupation of the retailers, not of the parties which operate them. So has the Supreme Court held in Cardtronics v Sykes (2020) UKSC 21. It is analogous to the situation of a lodging house. There is a single hereditament in the rateable occupation of the landlord.


Council Tax Relief

March 26th, 2020 by James Goudie KC in Council Tax and Rates

MHCLG has issued Guidance on relief to council tax payers in response to COVID-19 pursuant to Section 13A (1) (c) of LGFA 1992, funded by Government under Section 31 of LGA 2003.


Rateable Occupation

March 19th, 2020 by James Goudie KC in Council Tax and Rates

ATOS v FYLDE BOROUGH COUNCIL (2020) EWHC 647 ( QB ) is concerned with the liability, or rather non-liability, of persons for non-domestic rates in circumstances where the person said to be liable does not occupy the entirety of the hereditament in the relevant rating list, and part is let to others. Saini J reviewed the statutory framework and case law at paras 23-68 and gave his main conclusion at paras 69-75 : essentially rateable occupation has to be exclusive occupation. The Judge approved Ryde on Rating : “ if the whole building is entered in the rating list as one hereditament, no one tenant is liable for the rate of the whole, because he is not the occupier of the whole, nor can he be compelled to pay the rate on the part he occupies…”