A question of public benefit

Published 1 August 2023

In this article we look at the recent Supreme Court judgment in Merton LBC v Nuffield Health.  This was a case about whether Nuffield Health was entitled to claim charitable rates relief on one of its members-only gyms in South London, but raised issues related to the public benefit requirement of charitable status, which is particularly relevant for fee charging charities.

The Supreme Court ruled in favour of Nuffield Health, affirming its entitlement to an 80% relief from business rates and upholding that the gym qualifies as premises used wholly or mainly for charitable purposes under the Local Government Finance Act 1988 following a challenge from the London Borough of Merton Council ("LBMC").

What was the case about?

The case was not about the charitable status of Nuffield Health which is a registered charity established "to advance, promote and maintain health and healthcare of all descriptions and to prevent, relieve and cure sickness and ill health of any kind, all for the benefit of the public".  Nuffield Health operates hospitals, medical, fitness and wellbeing centres.

This case focused on whether a members-only gym operated by Nuffield Health in South London qualified for mandatory rates relief.   In order to qualify for mandatory rates relief, two conditions must be met:

• the relevant rate payer, in this case Nuffield Health, must be a charity; and
• the premises must be wholly or mainly used directly for activities which constitute carrying out the charitable purposes of the rate payer.

LBMC contended that the gym in question did not meet the charitable purposes requirement because the membership fees charged were too high for individuals of modest means, thereby excluding them from accessing the facilities, such that the public benefit requirement of charitable status was not satisfied.  The view of LBMC was that only the activities on this particular site should be taken into account for the purposes of determining whether mandatory rates relief applied.

However, the court disagreed and held it was not correct to undertake a site by site analysis of whether the activity at the relevant premises would satisfy the statutory conditions for charitable status (of which the public benefit requirement forms part).  As Nuffield Health is a registered charity, the first of the two tests is met.  The second stage was to assess whether the premises were in fact used wholly or mainly for activities that further Nuffield Health's charitable purposes and, on that point, the Supreme Court ruled that Nuffield Health did use the gym facility directly for the fulfilment of its objects.

What does this mean for charities?

This case confirms that the question of whether an institution is a charity or not, and in particular whether the public benefit requirement is met, is to be determined from the purposes of the institution overall, rather than what it does on any particular site where it carries out its activities. 

It remains the case that purposes will not be for the benefit of a sufficient section of the public if they exclude "the poor" (meaning those of modest means).  Such benefits must be more than minimal or token.