London Borough of Merton Council v Nuffield Health [2023] UKSC 18

Nuffield Health, a registered charity operating gyms, claimed mandatory 80% business rates relief for its Merton Abbey gym. Merton Council argued the gym's fees excluded those of modest means, failing the public benefit test. The Supreme Court held that charitable purpose is assessed by the charity's activities overall, not site-by-site.

Facts

Nuffield Health is a registered charity operating hospitals, fitness centres, and gyms across the United Kingdom. Its charitable purpose is to advance, promote and maintain health and healthcare for the public benefit. Nuffield Health claimed mandatory 80% relief from business rates under section 43(6) of the Local Government Finance Act 1988 for its Merton Abbey gym in the London Borough of Merton.

The Merton Abbey gym was a members-only facility with standard membership fees of approximately £80 per month. Merton Council refused the relief, contending that the gym’s fees excluded persons of modest means, thereby failing to satisfy the public benefit requirement necessary for charitable status when the gym’s activities were viewed in isolation.

Issues

The central issue was the proper construction of section 43(6) of the Local Government Finance Act 1988. Specifically, whether the requirement that a hereditament be ‘wholly or mainly used for charitable purposes’ required:

Merton’s Interpretation

That the activities at the specific hereditament, viewed separately and independently, must satisfy all conditions for charitable status, including the public benefit requirement.

Nuffield Health’s Interpretation

That the hereditament must be used for the charitable purposes of the charity as a whole, viewing the charity’s activities in their entirety rather than on a site-by-site basis.

Judgment

The Supreme Court unanimously dismissed Merton’s appeal, upholding Nuffield Health’s interpretation of section 43(6).

Lord Briggs and Lord Sales delivered the joint judgment, explaining that section 43(6) requires a two-stage enquiry:

The first stage of the enquiry is whether the ratepayer is or is not a charity. If the ratepayer is (like Nuffield Health) a registered charity that is the end of the first stage enquiry.

At the second stage, the Court held:

The enquiry at this second stage is whether the hereditament is in fact being used for the (necessarily charitable) purposes of the charity, or used for other activities lawfully carried on by the charity which do not directly serve those purposes.

The Court emphasised that a charity cannot have non-charitable purposes by definition, and therefore if a ratepayer is a registered charity, all its purposes are irrebuttably presumed charitable. The relevant question is whether the hereditament is used to fulfil those purposes, not whether the activities at that particular site would independently satisfy charitable requirements.

The Court applied established principles from Glasgow Corpn v Johnstone [1965] AC 609 and Oxfam v Birmingham City District Council [1976] AC 126, confirming that charitable purposes include activities directly fulfilling the charity’s objects or sufficiently closely connected therewith.

But the rich are as much a part of the section of the public benefited by Nuffield Health’s charitable activities as are the poor, and it must be assumed from its registration as a charity… that the poor are not excluded from benefit, on a view of Nuffield Health’s activities in the round, even if they are at the Merton Abbey gym.

Implications

This judgment clarifies that for mandatory charitable rates relief under section 43(6), rating authorities should not conduct a site-by-site analysis of whether each hereditament independently satisfies the public benefit test. Instead, once a ratepayer is established as a charity, the only question is whether the particular premises are used for the charity’s (necessarily charitable) purposes.

The decision provides certainty for multi-site charities that their individual premises qualify for relief if used to fulfil their charitable purposes, even where particular locations may serve only certain sections of the public. It affirms that the public benefit requirement is assessed across a charity’s activities as a whole, not at each individual location.

Verdict: Appeal dismissed. Nuffield Health was entitled to mandatory 80% relief from business rates under section 43(6) of the Local Government Finance Act 1988 for the Merton Abbey gym, as the hereditament was used for its charitable purposes when viewed in the context of its overall charitable activities.

Source: London Borough of Merton Council v Nuffield Health [2023] UKSC 18