Social housing charities should take note of The Appellant –v- Gateshead Metropolitan Borough Council a recent decision of the valuation tribunal in relation to the scope of the Class B exemption from council tax for residential properties owned and used by charities for their charitable purposes.
The dispute in this case arose in respect of an empty residential property owned by the appellant charity after the billing authority for the relevant area had formed the view that the temporary empty property relief usually available to charities under the council tax legislation was not available here, on the basis that the property had not been occupied in furtherance of the owner's charitable purposes when most recently occupied by a tenant.
The unnamed appellant was a charitable body which had several stated charitable objectives relating to furtherance of the Jewish faith, furtherance of Jewish education and relief of poverty or sickness within the Jewish community but it seemed to be accepted that none of these purposes could have been furthered in respect of the most recent occupation of the relevant premises because the most recent tenant had not been Jewish. In addition to the above-mentioned charitable objectives the appellant's constitution also referred to "such other purposes as are charitable according to the laws of England and Wales as the Trustees may from time to time decide.”
The individual in question was described to the tribunal as being an army veteran who had been offered accommodation when he was about to be made homeless and was in poor health.
In the tribunal's view, the appellant had not been acting in furtherance of its ‘general’ charitable purposes in this situation. Having regard to the facts and circumstances of the particular case, the tribunal noted that the appellant had not demanded a specific deposit from the tenant but it had used a standard tenancy agreement, issued by a commercial letting agency, under which it had imposed normal commercial terms by setting the weekly rent at a standard market rate for property of that kind and by demanding an advance payment of two months' rent. The appellant had acknowledged that it had made no attempt to screen the particular former tenant in order to ascertain whether he needed any special assistance, and there had no restrictions imposed when seeking a tenant as regards the requirement only to make the property available to persons who had been homeless or who had special needs.
Finally, it seems that the reason the property had ceased to be occupied was that the appellant had taken eviction proceedings against their former tenant when his rent fell into arrears. The published decision does not fully explain the eviction aspect and it is possible that the tenant eventually left voluntarily. The tribunal accepted that the purpose of commencing eviction formalities might have been to focus the tenant's mind on the need to address his responsibilities, rather than to obtain possession of the premises by pursuing the eviction procedure to a formal conclusion. But the tribunal also noted that the appellant had commenced the proceedings at the earliest opportunity and had apparently made no effort to discover why the tenant was in arrears. This suggested that the appellant was acting as an ordinary commercial landlord and not as a provider of special facilities to individuals who were homeless or otherwise vulnerable.
The tribunal also declined to accept that mere generation of rental income amounted to a use of premises that furthered the appellant's charitable purposes, concluding that there needed to be a direct link between the letting and the furtherance of a relevant charitable purpose - use of the property as an investment would not suffice.
Therefore, the appeal was dismissed and the appellant charity was held liable for council tax for the period in which the property stood empty. This provides a useful reminder that, as with taxation generally, charities do not enjoy any kind of universal immunity from 'local' taxation (that is, business rates and council tax) and that any charitable reliefs or exemptions from such taxation are usually subject to detailed and specific restrictions.