By Stuart Hicks, Director.
The High Court has dismissed 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 along with 16 others brought the case against 45 local authorities on the basis that they should be treated as charities and receive backdated relief of 80%.
Had the argument been successful then the backdated relief would have run to a staggering £1.5bn.
However, High Court judge Mr Justice Morgan rejected the charitable argument and its claim that Trust occupation of NHS properties was mainly used for charitable purposes.
The court ruling stated: “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…”
The collective sigh of relief from Local Authorities must have been palpable at the time, with a spokesperson for the Local Government Association (LGA) calling the ruling “good news” for councils and local services. An understatement to say the least.
He went on to say: “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.”
As always, these type of precedent rulings don’t happen overnight. This High Court ruling came about to answer a technical enquiry to the Institute of Revenues Rating and Valuation dating back several years, 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.
Most observers within rating circles would agree this was the correct outcome, however, it is just a shame that so much time and energy was wasted in the High Court as two sections of our public sector battle it out. The biggest loser is inevitably the taxpayer who picks up the legal tab.
The full ruling can be seen here: https://www.bailii.org/ew/cases/EWHC/Ch/2019/3436.html