The High Court has allowed an appeal by a charity against an order to pay business rates in excess of £1,600,000.
Charities are entitled to mandatory business rate relief if a property they occupy is used wholly or mainly for charitable purposes. In this case, the charity had taken a lease on two warehouse units for storage from the same landlord and had entered into an arrangement with the landlord to mitigate the business rate liability. However, the charity only occupied a small area within each of the warehouses for the storage of furniture.
The local authority applied to the court for a liability order. The judge was unable to conclude the units were being used wholly or mainly for charitable purposes, and therefore found in favour of the local authority, and made liability orders against the charity requiring payment of a sum in excess of £1,600,000.
The charity appealed.
The High Court held that the original decision was flawed and should be reconsidered. The District Judge was correct to focus on the extent to which the premises were used by the charity; occupation on its own is not sufficient; it was also incorrect to consider whether it was necessary for the charity to occupy two premises and whether it used the space efficiently.
However, these considerations were irrelevant for the purposes of establishing whether the property was used wholly or mainly for charitable purposes.
The case clarifies how the test for mandatory charity relief from business rates should be applied.
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