South Kesteven District Council v Digital Pipeline Ltd

Whether premises are “wholly or mainly used for charitable purposes” depends on the use made of the premises, not merely the charitable nature of the activity. The court must consider the nature and extent of actual use on a broad, common-sense basis. There is no rigid rule that more than 50% of floor space must be used. A space may be treated as used wholly for a charitable purpose even though parts are not constantly occupied, where the layout indicates one integrated area of use. Mere vacancy elsewhere does not support the charitable-use conclusion. The decision was quashed and remitted because the lower court had treated the absence of other activity as a positive factor.

The Council appealed by way of case stated from Deputy District Judge Noble’s decision in Grantham Magistrates’ Court dismissing applications for liability orders for non-domestic rates. The respondent charity leased a large former retail warehouse and held ten two-day public appeals during the lease. It collected unwanted computer equipment for charitable distribution in Africa and used approximately 42% of the available space on appeal days. The judge held that the hereditament was mainly used for charitable purposes under section 43(6)(a) of the Local Government Finance Act 1988, with consequences for liability during intervening periods under section 45A(2). The central issue was whether that conclusion was legally open on the facts and whether the statutory test had been applied correctly.

1. Appeal allowed and decision quashed. The matter was remitted to the magistrates’ court for reconsideration.
2. The statutory question is whether the premises are wholly or mainly used for charitable activity. It is not enough that the activity conducted there is wholly or mainly charitable. The extent and amount of actual use are relevant, but the assessment is fact-sensitive and requires a broad-brush approach. There is no automatic rule that use of less than 50% of the floor area defeats the exemption.
3. The nature of the activity and physical arrangement of the premises must be considered. An integrated area may fairly be treated as wholly used for a charitable purpose even though some floor space is not actually occupied. Conversely, a clearly demarcated unused area may properly be excluded.
4. Use by another body may dilute the charity’s use. The converse does not follow: premises which would not otherwise qualify do not qualify merely because the remainder is empty. The judge therefore erred in treating the absence of any other activity as a positive factor supporting the charity.
5. The decisive error could have affected the result because the conclusion was not clear-cut. The case was therefore remitted.

• High Court (Administrative Court): appeal by way of case stated allowed; the decision of Grantham Magistrates’ Court was quashed and the matter remitted.
• Grantham Magistrates’ Court: Deputy District Judge Noble dismissed the Council’s applications for liability orders on 5 May 2015.