03 December 2020

High Court ruling finds that a company with charitable objects was not eligible for business rates relief


A company with charitable objects has been ordered to repay in the region of £500,000 in business rates, after organising art exhibitions in vacant building. Preservation and Promotion of the Arts Ltd (PAPOA) has charitable objects which are to promote the appreciation of the arts (in any form). However it was not registered with the Charity Commission and had not applied to be registered.

Birmingham City Council and Bolton Council both sought liability orders against PAPOA for the payment of business rates. If commercial properties are unused full business rates are due, however if the properties are used by charities, they are entitled to a discount on business rates of at least 80 percent. PAPOA claimed that it was entitled to rates relief because the properties in question had been used for charitable purposes when they had held art exhibitions in the vacant buildings.

The High Court heard an appeal made by PAPOA against previous rulings ordering it to pay over £123,000 in Bolton and more than £371,000 in Birmingham. The rulings were upheld and the High Court dismissed PAPOA’s argument that the District Judge had not attempted to apply case law to the facts.

The issue in question was whether on the days that PAPOA held events at certain properties, were those properties wholly or mainly used for charitable purposes? This required the court to consider: (a) the public benefit of the events held; and (b) the extent of the use of the property.

Disagreeing with the arguments put forward by PAPOA, the High Court ruled that the burden of proof was on PAPOA to show that the properties were being used for wholly or mainly charitable purposes and therefore it was for PAPOA to prove that the activities were undertaken for the public benefit. Evidence was given on behalf of the Bolton Council that on visits to the properties, they were often found empty or with only small stands which had been set up with pictures on trestle tables. On one occasion, there was no advertisement of the event and no one was attending the three floors of the business park where it was supposedly taking place.

The Court agreed with the District Judge that it could not find that there was public benefit without further evidence, and that he had only been presented with “half-hearted attempts to put on display some pictures or projections for a short period of time”.

There was a further issue with the extent of the use of the premises for ‘wholly and mainly’ charitable purposes. The Court found that whether the use of space was efficient was not relevant, but that the use must be extensive and substantially for the public benefit, in order to meet the test of being use for charitable purposes. In Birmingham, over a short period of time, PAPOA had acquired tenancies of five large buildings with a total of eighteen floors, and no explanation was given to the Court as to why so much space was required. In the absence of satisfactory evidence to support that PAPOA had used the premises for public benefit, the Court agreed with the District Judge that PAPOA did not qualify for charitable relief.

The Court did note that had PAPOA been registered as a charity, the issue of whether its purposes were for the public benefit would have already been addressed. However, the fact that it was not registered was not a factor with any great weight.

The Charity Commission have said they are considering whether the matter is within their jurisdiction. PAPOA have said they will appeal the ruling.

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Category: Article