Landmark supreme court rates relief judgement could be ‘game-changer’ for local charities

Stef Smith
Stef Smith, Manager for Lovewell Blake

A recent Supreme Court case could prove to be a game-changer for some charities – as it has clarified the position on Mandatory Rates Relief (MRR) for charities, and will make it much easier for them to challenge local authorities which reject their MRR applications.

Stef Smith, Manager for Lovewell Blake

The case was brought by Nuffield Health, a registered charity which has as its charitable purposes ‘to advance, promote and maintain health and healthcare of all descriptions and to prevent and cure sickness and ill health of any kind, all for the public benefit’.  It principally pursues those objectives through the provision of gym facilities.

The London Borough of Merton rejected Nuffield Health’s application for MRR, claiming that its gyms were being run on a commercial basis and not for the public benefit.  After several years taking the case through the High Court, the Court of Appeal and the Supreme Court, the final judgement of the highest court in the land was that Nuffield Health were indeed entitled to MRR, on the basis that it is a registered charity, and that the premises in question are being used ‘wholly or mainly’ for its charitable purposes.

This is an important judgement, because Mandatory Rates Relief is a valuable benefit for charities, and one which some local authorities – many under severe financial stress – are increasingly attempting to restrict.

Charities, as well as community amateur sports clubs, can claim 80% rates relief on premises, providing they are being used mainly for charitable purposes.  Local councils can opt to ‘top up’ that relief to 100% on a discretionary basis, but with many local authorities experiencing huge budget cuts over the past decade, that is becoming less common.

It is helpful to look at the Supreme Court judgement in more detail to understand the usage criteria for MRR eligibility.  It states that ‘if the premises are being used for the (necessarily charitable) purposes of the charity or for incidental activities which are sufficiently closely connected with those purposes’, then MRR should be granted.

In contrast, if the premises are being used for purposes which are not closely connected with the charity’s purposes (such as fundraising or investment), then they are not eligible for MRR.

With more and more charities facing rejection of their MRR claims from cash-strapped local councils, this judgement could be a game-changer in encouraging Trustees to push back against such decisions.  It sets an important precedent, and should make councils think twice before digging their heels in when they are challenged.

With rateable values soaring as revaluations happen (in South Norfolk, for example, the average rateable value of commercial properties rose by 24.2% in 2022) and business rates now around the 50p in the pound mark, rates can be a large expense for charities which need substantial premises.  Hopefully this judgement will embolden them to stand up for the rates relief they are entitled to.

If you have any questions

Wide-ranging tax planning and compliance services for individuals seeking advice and guidance from our team of experienced and highly qualified professionals.

Friendly and coherent advice and guidance on accounting and tax matters for small business owners including those starting out for the first time.

Established businesses requiring accounting and tax compliance services, forward thinking tax planning advice and the support to help your business succeed.

Our full range of enhanced corporate services aimed at large companies and those requiring audit, assurance, corporate tax advisory and diverse tax planning services.



This is a test definition