The Local Government Association (LGA) will support 45 councils defending a challenge to business rates levied on NHS hospital properties that could see £2.35bn clawed back and set a significant precedent.
Consultants advising a group of 17 NHS trusts challenging the business rates on their properties said this week that a High Court trial has now been set for a test case in which Derby Teaching Hospitals NHS Foundation Trust and the others will seek 80% relief on its rates bill.
The move aims to gain the same charitable-status rates relief enjoyed by many private healthcare operators and, according to property firm Altus Group, would see the affected trusts get mandatory relief on their business rates backdated to April 2010 – costing town halls and the government around £2.35bn.
Data released by Altus ranked the Royal London Hospital in Whitechapel, east London, as the biggest single source of business rates payments to any council affected by the challenge.
It said the hospital would pay £9.16m in business rates in the current financial year to Tower Hamlets Council in London.
Altus said the Queen Elizabeth Hospital in Birmingham and Bristol’s Southmead Hospital will pay £7.15m and £5.99m respectively to their local collecting authorities.
NHS Trusts – and other organisations – have the right to challenge their business rate assessments if they believe they are not fair and correct.
However, formal advice pre-dating the 2017 revaluation suggested trusts are not entitled to relief under Section 47 of the Local Government Finance Act 1988 as they were not considered charitable organisations but public-sector funded organisations with boards of directors and rather than trustees.
The LGA, which is the lobby group that represents the vast majority of English councils, said it would back town halls involved in the November challenge on that basis.
“The LGA is supporting member councils who have received applications for mandatory relief from business rates on behalf of a number of NHS trusts and are working with them,” it said.
“We have sought legal advice from counsel.
“We believe that NHS Trusts and Foundation Trusts are not charities, and that the applications for rate relief are therefore unfounded.”
Altus Group said around one in four private hospitals are registered as charities – and benefit from the 80% mandatory business rates relief.
It said Nuffield Health, is the UK’s third largest charity by income.
Altus head of UK business rates Robert Hayton said many people would consider it “iniquitous” that NHS hospitals were treated like businesses and called on the government to end the dispute before the Derby-led case came to trial.
“If the case was successful it risks setting a precedent for other deserving public services with the significant loss in revenue, which goes to fund essential public services, having to shift to businesses at the next revenue-neutral revaluation in 2021 at a time when the tax burden is already far too high,” he said.
The court case is scheduled for trial at the Royal Courts of Justice in the week commencing 4 November.
