A number of specific situations and cases are worth being aware of.

Historic Houses

In [1998] EWCA Civ 1525 it was held that two loss-making historic homes could have a nil assessment for non-domestic rates. The reason given for this was that the costs of maintenance and repair could deter a potential tenant.

Trading subsidiaries

Premises occupied by a trading subsidiary will not be eligible for mandatory rate relief, but some local authorities are willing to grant a discretionary relief.

Where parts of premises are occupied by both the charity itself and a trading subsidiary, only the part occupied by the charity qualifies for mandatory relief, although in practice some local authorities accept an argument that the charity is occupying the whole premises and using them mainly for charitable purposes. This generally depends on what the trading subsidiary is doing, but considerations such as the floor space used or turnover can also be relevant, along with the terms on which the trading company has access to the property.

This was explored in the (non binding) Valuation Tribunal case of City of Bradford MDC and York Museums & Gallery Trust v Sykes (VO) (heard on 23/24 February 2015), which we understand may be appealed. It looked at who was in ‘actual, beneficial, exclusive and sufficiently permanent occupation’ and concluded on the facts that the trading subsidiary ‘merely acts as a management company’ and is not therefore in rateable occupation.

In order to avoid this problem, a number of charities make sure that the charity rather than the trading subsidiary owns its shops (provided they are wholly or mainly selling donated goods and have the power to undertake the trade themselves).

Charity shops

If a charity shop is wholly or mainly used for the sale of goods donated to a charity and the proceeds of sale of the goods are applied for the purposes of a charity, then the property will be treated as wholly or mainly used for charitable purposes.

Where the shops sell a mixture of donated and bought goods, the charity would need to look at the proportion of donated goods as against bought goods and keep on the right side of the ‘mainly used for the sale of goods donated to the charity’ test. Shops run by trading subsidiaries of charities are not eligible for mandatory rate relief.

Lettings for charitable purposes

Charities are not entitled to relief for properties let on normal commercial terms. If the property is let for a charitable purpose then the case is different.

For example, where a charity for ex-servicemen allows a disabled ex-serviceman to occupy one of its houses, that occupation is treated as use for a charitable purpose. A more unusual example was Royal British Legion Attendants Company (Belfast) Limited v Commissioner of Valuation (1979) NI 138, regarding a car park operated by a charity whose objects were to provide employment for ex-servicemen. The car park was manned by ex-servicemen and therefore eligible for the relief.

Service occupancies

A service occupancy is the situation in which housing is occupied by a charity’s employees – and it can be complex. As a general rule, property is ‘domestic’ if it is used wholly for the purposes of living accommodation and therefore is only eligible for relief if the persons living in it are eligible for relief themselves.

If, however, it is essential to the performance of the duties of the occupying employee that he or she should occupy a particular property, then where this is a result of a contractual obligation the occupation for rating purposes is treated as that of the employer and not of the employee.

This is also the case where it is not essential for the employee to live in a particular property or within a particular perimeter but doing so enables the employee better to perform his or her duties. The key is that there should be an express term in the contract that that person shall live there.

Disabled beneficiaries

Where a property is used as a facility for training, housing or ‘keeping suitably occupied’ persons who are disabled or who have been suffering from an illness or for welfare services for disabled persons, then the property can be exempt from non-domestic rates. This is not the case where a workshop is attached to a disabled person’s home and used for the purposes of his business.

There are a number of limitations to this exemption and it is therefore important to look carefully at the case law. A person is ‘disabled’ if he or she is blind, deaf or dumb, suffers from mental disorders of any description or is substantially permanently handicapped by illness, injury, congenital deformity or any other disability.

If charities try to use parts of their buildings for ‘quasi-commercial’ purposes, they risk contaminating their relief. For example in the case of a church this might mean losing the total exemption under the Places of Worship Registration Act and being downgraded to the 80 per cent charitable relief, but such cases are fact-sensitive.