In these difficult
economic times landlords have been doing everything possible to avoid business
rates on their empty units. One way that
(until now) seemed to be a win-win situation was allowing a charity to lease
The landlord could
pass the rates liability to the charity, which in turn was able to benefit from
substantial business rate reductions (normally 20% or less of the typical rate). The landlord and the charity would share that
saving through, for example, the charity paying only a peppercorn rent and
sometimes receiving a donation from the landlord to its cause. However, with budgets being squeezed, Councils
seem increasingly likely to challenge a charity’s right to business rate
In the recent case
of Kenya Aid Programme (“KAP”) v Sheffield City Council 2013, the
High Court considered whether the charity qualified for relief by using its premises
“wholly or mainly for charitable purposes”.
The premises in
question constituted two units, used by the charity to store furniture
to send to Africa; the first unit was 30-35% utilised and the second was 25-30%.
The District Judge decided that the Council was correct to
refuse relief, and KAP appealed, arguing that the Judge had misapplied the test
of whether the premises were wholly or mainly used for charitable
purposes. KAP argued that it only needed
to be in physical occupation of the premises for charitable purposes to satisfy
this criteria, and that the ‘wholly or mainly phrase’ should refer to the purpose of the use rather than the extent of the actual use made of the
The High Court held that KAP’s interpretation of what is
required to qualify for relief was flawed – the extent of the use was indeed
relevant – but held the Judge had also taken the wrong approach. It found that the Judge should not have taken
into account the efficiency of the
use of the premises and the necessity of the charity occupying two units. Also, it was not relevant whether the Council
believed the mutual benefit of the arrangement to be rate avoidance. However, the Judge should have considered in
more detail whether one of the uses of the premises was to produce revenue for
KAP, and whether this could prevent the storage of furniture (the charitable
use) from being the whole or main use.
The matter was therefore remitted to the District Judge for
re-consideration in light of the High Court’s comments - so watch this space
for further updates … !
Another recent and important case incorporating three appeals on this
issue was heard on 14 May 2013. In Public
Safety Charitable Trust (“PSCT”) v Milton Keynes Council and Cambridgeshire
Council and Cheshire Council v PSCT the key issue was again if relief
could be applied so long as the purpose of the occupation of a premises
was wholly or mainly charitable
or whether the extent of the use of a premises was relevant.
In all of the above appeals PSCT’s charitable activity was the provision
of free internet access and broadcasting messages on crime prevention and
public safety. PSCT would place a transmitter or transmitters (similar in size
to a domestic broadband box) into the premises they were occupying. The
transmitters took up minimal room, did not require any human operation, and
only needed occasional maintenance.
The Councils in these cases all argued that this minimal use of the
premises could not amount to them being used wholly or mainly for a charitable purpose, the extent of the use
must be considered and therefore relief should not apply.
PSCT argued that despite the premises being substantially vacant, the
sole way in which they were being used was for a charitable purpose and that relief
should therefore apply.
The court agreed with the decision in the Kenya Aid case that the extent
of use was relevant and the judgment concluded that:
“the substantial mandatory
exemption from rates for a charity in occupation of a building should depend
upon the charity actually making extensive use of the premises for charitable