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Charity rates relief revisited

Where the law provides for statutory rates relief for charities, should a local authority look beyond the registered charity status to consider whether the premises are actually operated for charitable purposes?

The Supreme Court in London recently considered the question of rates relief for a registered charity on premises being operated solely for profit.


Nuffield Health (‘Nuffield’) is a registered charity with the purposes “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.”

Under the Local Government Finance Act 1988, there is a mandatory 80% relief from business rates where: “…the ratepayer is a charity or trustees for a charity and the hereditament is wholly or mainly used for charitable purposes (whether of that charity or of that and other charities)”.

Aside from being a source of mirth for students of land law for many years, the term ‘hereditament’ refers to any property capable of being inherited, be that ‘corporeal’ – such as land, or ‘incorporeal’ – like a right of way. 

Nuffield operates a members-only gym in the London Borough of Merton that the local council (‘Merton’) considered did not meet the criteria of “charitable purposes” given the level of fees they were charging. 

This was successfully challenged by Nuffield in the High Court and upheld by the Court of Appeal.  Merton appealed to the Supreme Court.


“It is common ground that… the purposes of [Nuffield] are, taken together, for the public benefit, as is necessary for it to have charitable status. Also, Merton accepts that the trustees responsible for conducting [Nuffield’s] affairs are acting in accordance with their fiduciary obligations and not in breach of trust.”

Merton was correct in identifying the two-stage test under the Charities Act 2011:

(i) Charitable purpose: These are specified in the Act and include ‘the advancement of health’.

(ii) Public benefit: A charitable purpose must be for the public benefit.  

Where it failed was in its application: (i) Nuffield has a charitable purpose. (ii) Although the gym was operated for profit, those profits were used for the public benefit in pursuit of the charitable purpose. 

“It follows that Nuffield… does use the [premises]… wholly or mainly for its charitable purposes. Therefore Nuffield… is entitled to mandatory relief from business rates under [the 1988 Act].”

Merton’s appeal was dismissed. 


The Supreme Court has provided helpful clarity for local authorities and charities alike on the application of the two-stage test as well as the principles of ‘public benefit’. 

For more information about this article or any other aspect of commercial property disputes get in touch with your Napthens Solicitors in Preston, Blackburn, Liverpool, and across the North West, today.

Supreme court