Nuffield Health business rates case – wholly or mainly charitable purposes test

The charity Nuffield Health has successfully challenged Merton LBC over its decision not to grant mandatory business rates relief on a gym. The charity argued successfully that its gym (previously a commercial operation run by a separate entity) was used wholly or mainly for charitable purposes and was therefore eligible for 80% mandatory charitable rates relief. The full judgment can be read here.

The Council submitted that on any view of the constituent parts of the Premises, they were not being used or have not been used wholly or mainly for the claimant’s charitable purposes and that various parts of the Premises were not used for charitable purposes on any basis. It was submitted that there was no direct link between the current use of the reception and waiting area and the previous operation of the café in that area and the claimant’s charitable purposes; the spa pool, sauna and steam room simply provide a means of relaxation and recreation for the claimant’s members; and there is no evidence that the crèche and car park directly facilitate or are wholly ancillary to the claimant’s charitable objects rather than simply a convenience to members. It further submitted that, even if the gym, swimming pool and directly ancillary facilities such as the reception and waiting area, consultation rooms, staff areas and plant are regarded as being in charitable use, on a broad brush approach the Premises are not mainly used for charitable purposes.

The Tribunal judge rejected the Council’s submissions noting that it is artificial to break up the Premises into their individual constituent parts and consider the use of each individual part and not to focus on the user of the Premises as a whole. Such an approach would not be in accordance with the need to approach the question of the user from the claimant’s viewpoint on a broad basis.

The next question was whether, as the Council submitted, the use of the Premises was not for purposes directly related to the charity’s objects but is for commercial operations, with the consequence that the use is not “for” charitable purposes within the meaning of section 43(6)(a) of the 1989 Act. The judge accepted that premises which have a single use may be
used for more than one purpose. The question in that situation becomes whether the main use of the premises is for charitable purposes. There were two limbs to the defendant’s submission: first, that the main purpose of the Premises’ use is to raise funds for the claimant; and, second, that the Premises’ use is not for or wholly ancillary to the public benefit. The tribunal judge concluded that he was not satisfied that those matters are made out on the evidence.