Charity business rates challenged

Local authorities may challenge commercial property owners who use charitable organisations to avoid paying business rates on vacant properties, where the property is not being wholly used by the charity.Together with our professional partners we have noticed an upturn in the commercial property market; but there remain a number of vacant shops on our high streets, empty warehouses and unutilised office space throughout the country.

As owners of business properties are obliged to pay business rates when their property is empty for a number of months there has been an increase in the practice of letting vacant commercial properties to charitable organisations. This is largely due to the fact that there is a potential for business rates relief of up to 100% for charitable occupiers of property where that property is used wholly or mainly for charitable purposes.

Local authorities may reject claims for business rates relief if they have grounds to believe that the property is not being wholly or mainly used for charitable purposes

2013 Test Case

In a test case (Public Safety Charitable Trust v Milton Keynes Council [2013]) the High Court held that the 80% mandatory relief for business rates for a charity in occupation depended on the charity making ‘extensive’ use of the premises for charitable purposes. In this case, the installation of transmission boxes in a number of commercial properties broadcasting messages on public safety and crime prevention to Bluetooth enabled devices within range was not enough to qualify for the relief.

Warning from the Charity Commission

The Charity Commission has warned charity trustees that they may become personally liable if, before entering into a business rates savings scheme lease, they have not carefully considered whether the property is genuinely required and will benefit the charitable purposes of the organisation.

Local authorities that are also rating authorities are likely to challenge the letting of commercial properties that seek to take advantage of business rates relief more aggressively as they are able to retain half of any increases in revenue which they generate to invest in local services.

More Information

For more information or to discuss these issues please contact us.

This article was written by Keeley Miller, a Solicitor in our Commercial Property Team. This article is only intended to provide a general summary and does not constitute legal advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at Aug 2014.