London Borough of Merton Council v Nuffield Health

Mandatory charitable relief from business rates under section 43(6) of the Local Government Finance Act 1988 involves a two-stage enquiry. The rating authority first determines whether the ratepayer is a charity. It then asks whether the hereditament is used wholly or mainly to fulfil that charity’s purposes, or for activities directly facilitating or wholly ancillary to them.

The second stage does not require each site, viewed in isolation, to satisfy the public benefit requirement. A registered charity’s purposes are conclusively presumed charitable. Benefits provided to affluent members of the relevant public are no less charitable merely because those members can pay full fees, provided that people of modest means are not excluded when the charity’s activities are considered overall.

Nuffield Health, a registered charity advancing health, operated a members-only gym at Merton Abbey. The London Borough of Merton denied mandatory 80% business-rates relief because the gym’s fees excluded people of modest means when the site was considered separately.

The High Court held that section 43(6) of the Local Government Finance Act 1988 required Nuffield Health’s use of the gym to be considered in the context of its charitable activities overall. It also found that the gym itself did not exclude people of modest means. The Court of Appeal, in [2021] EWCA Civ 826, upheld the first conclusion by a majority but unanimously reversed the second. Merton appealed.

The central issue was whether each hereditament must independently satisfy every condition of charitable status, including public benefit, or whether it is sufficient that the site is used to fulfil the established purposes of the ratepayer charity.

1. Appeal dismissed unanimously. Lord Briggs and Lord Sales delivered the judgment, with which Lord Kitchin, Lord Hamblen and Lord Leggatt agreed. Nuffield Health used the Merton Abbey gym wholly or mainly for its charitable purposes and was entitled to mandatory relief under section 43(6) of the Local Government Finance Act 1988.

2. Section 43(6) requires a two-stage enquiry. First, the rating authority asks whether the ratepayer is a charity. A registered body is conclusively presumed under section 37(1) of the Charities Act 2011 to be established for charitable purposes only. An unregistered body must establish charitable status by reference to its constitution and, where necessary, its activities viewed overall.

3. Secondly, the authority asks whether the hereditament is actually used wholly or mainly to fulfil that charity’s purposes. This is principally a factual enquiry. It does not require a second charity-law assessment based on the counterfactual assumption that the hereditament is the charity’s only site.

4. A charity may conduct lawful activities which do not directly fulfil its purposes, including investment and fundraising. Such use qualifies only where it directly facilitates or is wholly ancillary to the fulfilment of the charitable purposes. The approach in Glasgow Corpn v Johnstone [1965] AC 609 and Oxfam v Birmingham City District Council [1976] AC 126 was applied.

5. The public benefit requirement is assessed by considering the charity’s purposes and activities overall. Subject to purposes specifically directed to relieving poverty, providing benefits to affluent members of a sufficient section of the public is as charitable as providing the same benefits to people of modest means. The latter must not be excluded from benefit overall, but every individual site need not serve them.

6. Nuffield Health’s registered purposes included advancing, promoting and maintaining health. Operating the gym directly fulfilled those purposes. Although the gym served people able to afford its fees, those users formed part of the public benefited by the charity. The Court therefore did not determine Nuffield Health’s challenge to the finding that the gym, considered separately, excluded people of modest means.

1. United Kingdom Supreme Court: In [2023] UKSC 18, unanimously dismissed Merton’s appeal and affirmed that Nuffield Health qualified for mandatory business-rates relief.

2. Court of Appeal: In [2021] EWCA Civ 826, dismissed Merton’s appeal. By a majority it upheld the construction of section 43(6) adopted below, but unanimously held that the Merton Abbey gym, considered alone, excluded people of modest means.

3. High Court: Stuart Isaacs KC held that the gym’s use had to be considered in the context of Nuffield Health’s charitable activities overall. He also held that the gym itself did not exclude people of modest means. No citation is stated in the judgment.