A group of NHS trusts have lost their lawsuit seeking an 80% reduction in business rates.
The 17 trusts were suing their local councils arguing that, as charities qualify for the rebate, so should they.
If they had won they could have qualified for as much as £1.5bn in overpaid tax.
Their argument was that NHS trusts qualify as charities and their properties are used for charitable purposes.
The case was heard last month, and in a ruling handed down yesterday, the judge, Mr Justice Morgan, dismissed their case saying they didn’t qualify as charities.
The case is controversial as private hospitals that are registered as charities can, and do, apply for the rebate.
The issue “raises a point of considerable importance to NHS foundation trusts and to rating authorities,” the judge said in his ruling.
He added that the case was specifically about NHS Foundation Trusts, which are distinct from NHS Trusts as they are set up under different Acts of Parliament.
Specifically, lawyers for the foundation trusts argued that they met the definition of “charity” set down in the Local Government Finance Act of 1988, which is the act governing the rates and rebate.
The act defined a charity as “an institution or other organisation established for charitable purposes only or any person administering a trust established for charitable purposes only.”
But in his ruling, the judge concluded that foundation trust can fulfil other functions, such as providing good as and services.
“I conclude that a foundation trust is not established for charitable purposes only and therefore the preliminary issue should be answered by holding that a foundation trust is not a charity for the purposes of… the 1988 Act,” he ruled.
Robert Hayton, UK head of property tax, Altus Group said that if the ruling had gone the other way it would have caused major complications.
“No one would argue against maximising the money available in the NHS for frontline care,” he said, “but 80% rates relief for hospitals would have robbed Peter to pay Paul when local authorities are increasingly dependent on this income to fund other essential services.”
“There was also a real risk of creating new anomalies and setting a precedent for other parts of the public sector where services are also provided by charities. A near exemption for a land-hungry part of the public sector would simply have shifted the burden of funding local services to businesses under the next revenue neutral revaluation at a time when the burden is already far too high.”
Derby Teaching Hospitals NHS Foundation Trust and 16 Others v Derby City Council and 44 Others and Charity Commission for England and Wales
High Court (Morgan J) 12 December 2019
Christopher Tidmarsh QC and Francesca Quint and Luke Wilcox (instructed by Addleshaw Goddard LLP) for the Claimants
Amanda Tipples QC and Matthew Smith (instructed by Sharpe Pritchard LLP) for the Defendants
Christopher McCall QC and Naomi Hart (instructed by Charity Commission for England and Wales) for the Intervener
