Can a charity lose its relief if it provides fee-paying services?

14th July 2023

The recent Supreme Court case of London Borough of Merton Council vs Nuffield Health has clarified if a charity’s 80% mandatory relief on business rates can be challenged following the provision of fee-paying services.


Section 43(5) and (6) of the Local Government Finance Act 1988 provide that a mandatory 80% relief from non-domestic rates applies to premises occupied by a charity and used wholly or mainly for charitable purposes. The premises in question in this case was a members-only gym located at Merton Abbey.

Nuffield Health’s charitable objects are to advance, promote and maintain health and health care of all descriptions and to prevent, relieve and cure sickness and ill health of any kind.

In 2016, Nuffield Health acquired Merton Abbey and began providing fee-paying facilities.

The London Borough of Merton Council (“the Council”) challenged Merton Abbey’s entitlement to the 80% mandatory relief, alleging it was disqualified because the price of membership excludes people of modest means and therefore undermines the claim that it is mainly used for charitable purposes and in accordance with the public benefit requirement.

The decision

The Supreme Court asserted that in assessing compliance with the public benefit requirement, it is necessary to consider Nuffield’s activities as a whole and not assess public benefit based on Merton Abbey in isolation. Furthermore, it was held that, although charities may not exclude the poor, this operation benefiting fee-paying clients did not preclude any benefit to the poor, as most of Nuffield’s work overall still promotes health through operations that benefit those of modest means. The Court concluded that Merton Abbey was therefore entitled to an 80% relief from non-domestic rates.

What does this mean for charities?

Going forward, this provides clarity to clients that relief from non-domestic rates is not contingent on the charitable nature of one property in isolation but is to be determined by considering the entirety of the charity’s operations.

It also shows that not all operations need to be accessible to those of modest means so long as the majority of the charity’s operations do not exclude the poor. Therefore, charities may maintain some fee-paying facilities that further their aims so long as most of their operations remain accessible to those of modest means.

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