Business rates and the Public Safety Charitable Trust ruling

In a recent High Court ruling, the Public Safety Charitable Trust lost its case against three local authorities which contested its claim for charitable relief on unused business premises. Virginia Lloyd analyses the judgment.

The Public Safety Charitable Trust, which has charitable status, leases vacant business premises for a peppercorn rent and assumes liability for the payment of business rates, so absolving landlords of the liability to pay the rates for the duration of the lease. The Trust installs wi-fi / blue tooth equipment which, it alleges, transmits crime prevention messages.

By virtue of its charitable status, it then applies to the relevant local authority for a mandatory relief of business rates of 80% and discretionary relief for the remaining 20%. It obtains a reverse premium payment from a landlord for entering into a lease which enables the landlord to save business rates, thus amounting to a tax avoidance scheme.

It is estimated that the Trust has taken out approximately 2,000 leases around the country, resulting in millions of pounds of business rates remaining unpaid pending the decision of the High Court.

South Cambridgeshire District Council had declined to award any relief of rates to the Trust on the basis that it was not using each of the business premises ‘wholly or mainly for charitable purposes’ pursuant to s. 43(6) of the Local Government Finance Act 1988.

The Valuation Office Authority subsequently amended the listing of business rates in relation to premises leased by the Trust so that there was a separation of the premises, known as a ‘hereditament’ between the main, unoccupied hereditament and the wi-fi hereditament. The wi-fi hereditament was billed as having a rating valuation of £100 regardless of the number of wi-fi boxes installed at the premises. The rating for the main hereditament remained unchanged.

The council charged empty rates of 100% liability to the Trust for the main hereditament on the basis that it was not occupied and granted mandatory relief of 80% for the wi-fi hereditament. Discretionary relief of 20% was refused.

The Magistrates’ Court held that the Trust was not using the main hereditament wholly or mainly for charitable purposes and granted liability orders in respect of the unpaid business rates to South Cambridgeshire District Council. Similarly, in the case of Milton Keynes Council, the Magistrates’ Court granted a liability order to the council, though Milton Keynes had not separated the hereditaments into separate ratings as between the main and wi-fi hereditaments.

The third case to be heard involved Cheshire West and Chester Council. District Judge Sanders found in favour of the Trust on the basis that the business premises in question had 13 separate wi-fi boxes and the wi-fi hereditament listed by the Valuation Office Authority related only to one wi-fi box. The council appealed to the High Court.

Mr Justice Sales heard the linked cases at the Administrative Court on 1 May 2013 and formally handed down judgment on 14 May 2013 in favour of the local authorities. The councils were represented by Cain Ormondroyd and the Trust by Simon Myerson QC.

On Mr Justice Sales’ analysis, the main issue before him related to the proper construction of the test as to whether the interpretation of ‘wholly or mainly’ used for charitable purposes related to the extent of use or to the purpose of use.

In his judgment, he had regard to the recent ruling in the case of Kenya Aid Programme v Sheffield City Council [2013] EWHC 45 Admin, in which the same issue had been considered. In that case, Lord Justice Treacy had held that the extent of use was the correct test to apply.

Mr Justice Sales indicated in his ruling that he had independently reached the same view. In the case of Cheshire West and Chester Council, he ruled that District Judge Sanders should have assessed the wi-fi hereditament as comprising all 13 transmitters located in the building, with none forming part of the main hereditament.  

All grounds of appeal relied upon by the Trust failed. Its appeals against South Cambridgeshire District Council and Milton Keynes Council were dismissed whilst the appeal brought by Cheshire West and Chester Council was allowed and has been remitted back to the Magistrates’ Court in relation to the main hereditament; the wi-fi hereditament having been determined.

Since the decision has been formally handed down, the Trust has indicated to South Cambridgeshire District Council that it will pay the liability orders which were the subject of the High Court proceedings together with costs. However, it declined to pay the monies falling due in unpaid business rates which were the subject of stayed liability order applications, and further declined to pay for liability orders which had been granted following the Magistrates’ Court decision but prior to the High Court case being determined.

The Trust has since indicated that the referral of the Cheshire West and Chester Council case back to the Magistrates’ Court affords it the opportunity to pursue fresh arguments.

The view taken by South Cambridgeshire District Council is that the Magistrates’ Court is bound by the ruling of the High Court and that all arguments brought by the Trust against numerous local authorities have been well rehearsed and have failed.

It is anticipated that councils around the country will be applying for liability orders to be granted without further delay and will seek to enforce payment promptly. A failure to pay outstanding liability orders by the Trust would result in insolvency proceedings being commenced for the winding up of the charity.

Virginia Lloyd is a solicitor at South Cambridgeshire District Council. She can be contacted on 01954 713060 or by This email address is being protected from spambots. You need JavaScript enabled to view it..