Court rejects NHS trusts’ claim for millions in business rates relief

A judge yesterday threw out a claim by 17 NHS trusts that they are charities and should receive millions of pounds of business rates relief.

Derby Teaching Hospitals NHS Foundation Trust and 16 others brought the case against 45 local authorities claiming that they should be treated as charities and be given backdated relief of 80%.

SAVE THE DATE – LATIF NORTH
March 25th, 2020, Manchester
Council treasury investment & borrowing

However, High Court judge Mr Justice Morgan yesterday rejected the claim that they are charities and occupy properties that are mainly used for charitable purposes.

The ruling said: “It is clear that the drafting style adopted in the [National Health Service Act] 2006 Act in relation to foundation trusts was not with a view to ensuring that their purposes were narrowly stated so that they would be exclusively charitable purposes.

“Instead, the drafting style adopted appears to have been to define the functions of a foundation trust in wide terms; hence, the use of words like “any purposes”, “related to” and “in connection with”.

“The result of the above reasoning is that a foundation trust is not established for charitable purposes only and so is not a charity…”

Reacting to the court decision, a spokesperson for the Local Government Association (LGA) said: “Today’s ruling is good news for councils and the local services our communities rely on across the country.

“Councils, supported by the LGA, are pleased this common-sense decision will not see them having to pay NHS trusts and foundation trusts £1.5bn in unfounded backdated business rates relief nor see them eligible for 80% relief going forward.

“Business rates, alongside council tax, are an extremely important source of income for local government so this would have huge implications for residents and the vital local services they rely on.”

The High Court ruling follows an answer to a technical enquiry to the Institute of Revenues Rating and Valuation a few years ago which concluded that NHS trusts are not entitled to relief.

This was because trusts are not considered charitable organisations but rather public sector funded organisations with boards of directors and not trustees.

The Room151 Weekly Newsletter covers local government treasury and pension investment, funding, development, resources and technical finance. Register here. 

The LGPS Quarterly Briefing focuses purely on pension fund investment. Register here.