In the recent case of London Borough of Merton Council v Nuffield Health, the UK Supreme Court concluded that whilst an individual Nuffield Health gym might be ‘for the rich but not the poor’, Nuffield Health’s activities in the round were exclusively charitable within the meaning of Charity law. Therefore, the gym which was used directly for fulfilling those purposes, would qualify for mandatory charitable relief from business rates.
In doing so, the Court reminded us that ‘charity is a legal term of art, the definition of which, including the public benefit requirement, does not always accord with the general public understanding of what is and what is not charitable’.
Nuffield Health is a registered charity whose purposes are to “advance, promote and maintain health and healthcare of all descriptions to prevent, relieve and cure sickness and ill health of any kind, all for the public benefit.” Nuffield pursues those purposes primarily through the provision of gym facilities, including the gym in question at Merton Abbey, whilst also operating private hospitals and clinics. The cost of membership at their Merton Abbey gym is around £80 per month. The business rates liability for that gym was the focus of this appeal.
When Nuffield acquired the Merton Abbey fitness centre in 2016, it claimed the mandatory 80% relief from business rates which is available to charities when using their premises for charitable purposes. Following an inspection, Merton Council withdrew the relief shortly afterwards on the basis that the membership fees were set at a level which excluded persons of modest means, and as such, the premises was not used for charitable purposes because the requirement for public benefit was not satisfied.
Nuffield challenged this decision and succeeded in both the High Court and Court of Appeal.
Supreme Court Decision
The Supreme Court upheld the decision of the lower courts, dismissing the Council’s appeal.
The Supreme Court concluded that even though the services provided at the Merton Abbey gym do not, taken by themselves, satisfy the public benefit test – Nuffield plainly used the premises for charitable purposes because they are a registered charity and a body can only be registered as a Charity where its purposes are exclusively charitable. Where a body is not a registered charity there will be a preliminary test as to whether its purposes are exclusively charitable.
It was held that where a charity operates from multiple sites, it was not necessary to assess the public benefit test for each and every site. The Court commented that it must be assumed from registration as a Charity that the poor are not excluded from the benefit of Nuffield Health’s activities in the round, even if they might be for this particular gym. The Court did reiterate that the use of the premises must be a use which directly fulfils the purpose of the Charity so, for example, a property purchased as an investment to raise funds for the Charity would not qualify for relief, but a gym which was used for promoting physical health, did.
This decision should provide clarity on the application of ratings relief for charities operating from multiple sites.
Charitable bodies can take some comfort in the fact that they should not need to demonstrate that the activities carried out on each of their sites would pass the public benefit test in its own right.
So long as the premises are used for activities which directly fulfil the charitable purposes of the charity, it will be entitled to mandatory charitable relief without the need for an individual assessment of the public benefit requirement at each of those premises.
Two of the Judges (Lord Leggatt and Lord Briggs) were also in the Supreme Court which decided the Hurstwood v Rossendale case in 2021 in which they stressed the importance of interpreting Rates legislation so as to give effect to its intended purpose. The Supreme Court in this case reiterated that principle and looked back to a 1959 Report by Sir Fred Pritchard to help find the purpose (and therefore meaning) of the legislation. Practitioners should heed that direction when trying to anticipate what the Court’s approach to future questions of interpretation might be.
The full judgment may be accessed here: London Borough of Merton Council (Appellant) v Nuffield Health (Respondent) (supremecourt.uk)
Article co-authored by Annie Fuller, Trainee Solicitor at CMS.