My Community Space v Ipswich Borough Council

For charitable rates relief, the hereditament must be used wholly or mainly in the actual carrying out of, or in a use directly related to, the charity’s purposes. Lawful tax planning is not itself relevant. Factors such as efficiency, necessity, presentation, advertising and public response are ordinarily immaterial where genuine charitable use is established. They may become relevant where the evidence shows that the apparent activity lacks the purpose or character of charitable use. A court may identify an error in describing the test as requiring “active” extensive use, yet find that the error made no difference where the underlying factual findings independently defeated the claim.

My Community Space, a registered charity and tenant of eight hereditaments, appealed by case stated against liability orders requiring payment of national non-domestic rates. It claimed reduced rates for periods of occupation under section 43(6) of the Local Government Finance Act 1988, and zero liability during empty periods under section 45A(2).

The District Judge found that poster-board exhibitions did not amount to use wholly or mainly for charitable purposes. She relied on the exhibitions’ presentation, limited advertising, appointment-only access, lack of signage, limited information and MCS’s reactive conduct. The central questions were whether those findings were legally sustainable and whether the judge had applied an impermissibly stringent test.

1. Appeal and case stated. The appeal was dismissed in substance. The answers were: Q1(a), no; Q1(b), yes; Q2, the question concerning the change of objects did not arise, while sufficient reasons had been given concerning the number of advertisements; Q3, no; and Q4, yes, but without impact on the outcome.
2. Statutory test. Sections 43(6) and 45A(2) require the charity to establish a qualifying use of the hereditament. The use must be wholly or mainly for charitable purposes. The governing distinction, drawn from Oxfam v Birmingham City Council [1976] AC 126, is between use in the actual carrying out of charitable purposes, or directly related to their achievement, and use merely directed to raising money or otherwise helping the charity.
3. Tax avoidance. A charity or ratepayer may lawfully organise its affairs to reduce rates liability. That purpose is immaterial when deciding whether a qualifying use has in fact been established: R (Makro Properties Limited) v Nuneaton and Bedworth BC [2012] EWHC 2250 (Admin); Sheffield City Council v Kenya Aid Programme [2013] EWHC 54 (Admin); and South Kesteven DC v Digital Pipeline Ltd [2016] EWHC 101 (Admin).
4. Relevant factors. Efficiency, necessity, the amount of space strictly required, and the fact that premises could have been used more efficiently are ordinarily irrelevant. The court must consider the facts as they are and adopt a broad approach. However, those restrictions do not apply where the apparent use lacks the appearance, purpose or intent of a genuine charitable exhibition. In that event, presentation, accessibility, advertising, signage, information and the charity’s conduct may materially illuminate whether the use was truly in pursuance of charitable purposes.
5. Application. The District Judge’s finding that the exhibitions lacked the appearance, purpose or intent of public exhibitions for charities and potential volunteers was a finding of fact. It had not been challenged in the case stated and placed MCS on the wrong side of the statutory line. The judge therefore did not err in considering the Q3 factors. The incorrect word “actively” in the description of the test should have been “actually”, but that difference was immaterial in the circumstances.
6. Factual findings. The finding that the charitable objects were changed in response to the letter of 26 October 2016 was unsustainable because the change occurred only three days later. That error was immaterial. The finding that there had been six advertisements was adequately reasoned by the rejection of Mr Cook’s evidence.

High Court (Administrative Court): appeal by case stated from liability orders made by District Judge Celia Dawson in the South Suffolk Magistrates’ Court following her judgment dated 15 May 2017. The appeal was dismissed in substance, with the answers to the case stated questions recorded in the judgment.