NHS trusts give up £2 billion business rates dispute with councils 

Eleven NHS trusts have abandoned plans to petition the Court of Appeal as part of a dispute with councils over the business rates they have to pay on hospitals.

The trusts conceded after a five-year effort that sought to argue that they should be treated as charities and therefore be eligible for reductions on the non-domestic rates payable on the properties they occupy.

If successful, the hospitals would have received a mandatory 80% discount off their business rates tax bill, and councils would have been forced to pay more than £2 billion in backdated business rates rebate.

At the High Court in December 2019, the group, which at that time numbered 17 NHS trusts, asserted that the relevant properties, mostly hospitals, were wholly or mainly used for charitable purposes (whether of that charity or of that and other charities).

The defendants, 45 rating authorities in whose areas the claimants occupied relevant properties, denied that the NHS trusts were charities and that the relevant properties were wholly or mainly used for charitable purposes.

Finding for the defendants, Mr Justice Morgan concluded that a foundation trust is not established for charitable purposes only and so is not a charity within the meaning of section 67(10) of the Local Government Finance Act 1988 or section 1(1)(a) of the Charities Act 2011. A foundation trust is therefore not a charity for the purposes of section 43(6) of the 1988 Act.

Following the ruling, six of the NHS trusts ended their legal effort, but the remaining eleven decided to petition the Court of Appeal. The case has now been dropped, meaning hospitals will continue to pay full normal business rates.

Analysis of official Government data by the real estate adviser Altus Group shows that NHS hospitals in England and Wales will pay a total of £423.02 million in business rates from 1st April for the 2021/22 financial year.

The Government are currently reviewing the business rates system and the final report of the ‘Fundamental Review’ will be published in the Autumn later this year. The Government say that will set out the Government’s priorities for reform and its longer-term vision for the system.

Robert Hayton, UK President of Property Tax at Altus Group, said: "This is a classic situation of being legally right but, in the Court of public opinion, morally wrong”. He added that it was for the Government to legislate "if it offends their conscience". 

Adam Carey