Supreme Court Confirms Key Principles of Public Benefit in Charity Law
The Supreme Court's pragmatic judgment in a recent case provides a helpful clarification on rules for charity business rate relief, whilst preserving and confirming charity law principles on public benefit.
The case of Merton LBC v Nuffield Health (7 June 2023) primarily concerned one aspect of a statutory test under which charities benefit from 80% relief from business rates where sites that they occupy are "wholly or mainly used for charitable purposes (whether of that charity or of that and other charities)" (Section 43(6)(a), Local Government Finance Act 1988).
The dispute arose in respect of a site run by Nuffield Health, which is a registered charity that operates numerous hospitals and health and fitness facilities. London Borough of Merton Council had refused to grant Nuffield Health relief from business rates on a members-only gym, on the basis, Merton Council argued, that the gym was not being used for charitable purposes because the level of the fees charged excluded people of modest means from joining, such that the public benefit requirement was not satisfied.
After Nuffield Heath successfully challenged that decision in the High Court and Court of Appeal, Merton Council appealed to the Supreme Court.
The Supreme Court unanimously dismissed the appeal and found that Nuffield Health was indeed entitled to the mandatory 80% relief from business rates in relation to the members-only gym. It held that, for the rates relief to apply, the premises did need to be used for activities that constituted the carrying out of some part of Nuffield Health's wider programme of activities for its charitable purposes (or for activities that were sufficiently closely connected with the fulfilment of those purposes). However, the particular site did not need to satisfy the full breadth of the charity's charitable purposes and requirements for charitable status generally; the activities at the particular site were not required to cover all of the charity's purposes and the site was not, viewed in isolation, required to satisfy the public benefit test. .
In reaching this judgment, the Supreme Court endorsed the decision of the Upper Tribunal in R (Independent Schools Council) v Charity Commission for England and Wales [2011] UKUT 421 (TCC), and so confirmed a few important points on the principle of public benefit in charity law:
- A charity's purpose, which must be both charitable in nature and for the public benefit, will not be considered to be for the benefit of the public if the purpose excludes the poor, that is, people of modest means.
- A charity's activities for the benefit of rich members of the public are no less part of their charitable activities for the public benefit than activities that benefit those of modest means. (The exception to this principle is where a charity's purpose is the relief of poverty.)
- In assessing whether a charity's activities in furtherance of its purposes meet the public benefit requirement, it is the manner in which the charity fulfils the relevant purpose or purposes overall that is relevant, rather than whether it does so in any particular place where its activities are carried on.
The last point is key. The activities carried on in furtherance of charitable purposes must, when considered overall, meet the full public benefit requirement. As part of this overall mosaic of public benefit fulfilment, each of a charity's charitable purposes must be pursued for the public benefit, and each activity must be chosen so as to contribute to the pursuit of the object in question for the public benefit. A mosaic is comprised of individual tiles which are not themselves a mosaic. This case can be thought of as recognising that, provided the overall mosaic of activities are pursued fully for the public benefit, any given tile of that mosaic - any particular activity or any particular site taken in isolation - might not on its own meet the entirety of the public benefit requirement, including the overall obligation to make the charitable activities available to people of modest means.
See the Supreme Court's judgment.