London Borough of Merton Council v Nuffield Health

Factual and Procedural Background

The Respondent is a registered charity operating hospitals, gyms, and wellbeing centres across the United Kingdom. One such facility, a members-only gym in The City (the “Merton Abbey gym”), was acquired on 1 August 2016. The Appellant, the local rating authority, refused mandatory 80% business-rates relief under section 43(6) of the Local Government Finance Act 1988 (“LGFA 1988”), asserting that fees at the gym excluded people of modest means and therefore failed the public-benefit element of charitable status.

The Respondent brought proceedings and succeeded before the trial judge and, on different reasoning, in the Court of Appeal. The Appellant appealed to the Supreme Court, challenging the construction of section 43(6). The Respondent cross-appealed on a subsidiary issue that became moot once the principal construction point was resolved in its favour.

Legal Issues Presented

1. Whether, for the purposes of section 43(6) LGFA 1988, the question “is the hereditament wholly or mainly used for charitable purposes?” must be answered (a) by examining the use of the individual premises in isolation (the Appellant’s case) or (b) by asking whether the premises are used in pursuit of the charity’s overall charitable purposes, assessed in the context of its activities as a whole (the Respondent’s case).

Arguments of the Parties

Appellant's Arguments

• Business rates are a tax on property; entitlement to relief must turn on the use of each hereditament alone.
• Section 43(6) should be construed strictly as an “exception” to the general liability to rates; therefore each site must itself meet all elements of charitable use, including public benefit.
• Reliance was placed on provisions governing rates for unoccupied hereditaments to suggest a site-specific analytical approach.

Respondent's Arguments

• The statutory language ties eligibility to the purposes “of that charity,” importing the general law of charity; a registered charity’s purposes are conclusively presumed charitable under the Charities Act 2011.
• The proper two-stage inquiry is: (1) Is the ratepayer a charity? (2) Is the hereditament used in furtherance of that charity’s purposes (or activities ancillary/closely connected thereto)? A separate public-benefit test at site level is unnecessary and contrary to precedent.
• Historical context (Pritchard Report, 1961 legislation) shows Parliament intended a simple, predictable relief based on the charity’s status, not a counter-factual site-by-site charity law exercise.

Table of Precedents Cited

Court's Reasoning and Analysis

The Supreme Court adopted a two-stage analysis inherent in section 43(6):

• Stage 1 – Charitable Status: If the ratepayer is a registered charity, its purposes are conclusively presumed charitable (Charities Act 2011, s. 37(1)).
• Stage 2 – Use of the Hereditament: The court asks whether the premises are used wholly or mainly in pursuit of those charitable purposes, or for activities so closely connected as to be “ancillary” (per Glasgow Corporation and Oxfam). A factual, not legal, inquiry suffices.

Applying these principles, the Court held:

• The Respondent is indisputably a charity; its sole or main purpose is the advancement of health.
• The Merton Abbey gym directly fulfils that purpose by providing facilities that promote health through exercise; it is not merely fund-raising or investment property.
• Whether the gym’s fees exclude persons of modest means is irrelevant to Stage 2 because the public-benefit test was already satisfied at Stage 1 when the Respondent’s overall activities were considered.
• The Appellant’s proposed site-specific public-benefit examination would create an artificial counter-factual inconsistent with charity law and the legislative history.
• Strict-construction arguments drawn from EU law have no domestic counterpart and, in any event, section 43(6) is a calibrated relief, not an “exception” requiring narrow reading.

Holding and Implications

APPEAL DISMISSED. The Respondent is entitled to the mandatory 80% business-rates relief for the Merton Abbey gym.

Implications: The decision affirms that, for charity-rate relief, once the ratepayer’s charitable status is established, the only remaining question is whether the premises are used to advance the charity’s purposes (or ancillary to them). Rating authorities need not conduct separate public-benefit analyses on a site-by-site basis, promoting administrative simplicity and consistency. The judgment does not create new precedent but clarifies the application of long-standing principles.