NHS Trusts taking Government to court over business rates

Stuart Hicks, Manchester Office, Director - Dunlop Heywood

By Stuart Hicks, Director

An interesting legal development is unfolding with reports that more than a dozen NHS Trusts are taking the Government to court, arguing they should receive an 80% reduction in business rates to bring them into line with private hospitals.

It is now going to be down to The High Court, according to The Press Association, to decide who will keep the reputed combined £2.4bn that the Trusts say has been overpaid since 2010.

The Action has been instigated by 17 Trusts, led by University Hospitals of Derby and Burton NHS Foundation Trust. In all, 45 councils are set to be in court this Autumn for a preliminary hearing.

If the Trusts are successful, it will leave a huge hole in the public finances of local councils as well as the Treasury, at a time when both Conservative would-be leader/Prime Minster candidates seem to be promising party members the earth in spending pledges.

At the moment, hospitals in England and Wales pay around £408.6m in business rates this year. If they win this business rates’ battle then the tax rebates for mandatory relief will be backdated to April 1, 2010, bringing the overall saving to the £2.4bn figure mentioned earlier.

The arguments in court will probably rest on the affected councils claiming that NHS Trusts and Foundation Trusts are not charities and, therefore, not eligible for mandatory business rate relief.

This is in comparison to most private healthcare groups which are registered as charities, which benefit from 80% mandatory business rates relief.

In the Education sector private schools also benefit from the same tax relief, along with Free Schools but local authority schools still have to pay rates. If the NHS Trusts are successful will we see schools and LEAs using the same argument in the future to secure business rate exemptions?

In the meantime, expensive lawyers will be preparing their briefs for both sides as the Government almost battles with itself to see which part of the public sector should keep this particular slice of the business rates’ pie.