June 8th, 2023 by James Goudie KC

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.

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