Insight

Rates mitigation schemes that rely on charitable occupation under question

An interesting issue has been examined by Walker J in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin). Ipswich Borough Council said that the occupations by registered charity My Community Space (MCS) were shams; set up for the purpose of trying to justify their claim for charitable rates relief. MCS said that they were in rateable occupation and the use of the properties was wholly or mainly for charitable purposes and that the relief should apply.

MSC ran a series of exhibitions to promote volunteer recruitment but their argument became unstuck when Ipswich BC found some of the adverts promoting the exhibition ran after the events. They also discovered that people could only attend the exhibitions if they booked an appointment in advance, by telephone, and that even the charity’s own representatives didn’t know the security code to enter the building and had to rely on a security guard. Their argument was further damaged when it was disclosed that sections of the building weren’t accessible due to building work and some of the posters displayed on easels were duplicates.

MSC contended that the Council’s case was flawed by it placing weight on its perception that their use of the property was a sham. It “emphatically denied” the accusation and argued a “sham” had no legal implications in any case.

The broad approach taken by Walker J in the case to charitable relief claims appears to be that in deciding a charity relief application it is necessary to evaluate the ‘extent of use’ of the property but that if that use lacks the appearance, purpose or intent of the use it was supposed to have according to the charity’s objects, then the factors which are relevant to considering the relief application change and that factors that were until that point prohibited from consideration, as irrelevant, can become ‘highly relevant’.

On the facts in this case, the DJ had undertaken an evaluation of whether the purported activity, the ‘…public exhibition for charities to obtain volunteers and for the public to seek opportunities to participate and contribute to charitable volunteering’ did indeed have that appearance, purpose or intent.

Given the undisturbed finding that the use of the properties by MCS did not have the appearance, purpose or intent for use as set out by their charitable objects, the appeal by MCS failed.

The factors considered were the number, nature and size of the advertisements for the exhibitions; how the use of the properties were arranged for presentational purposes during the exhibitions; the exhibitions not being stimulating or informative; MCS being reactive not proactive; the exhibitions being only open to the public by appointment; and there being no signage to direct visitors round the building. These factors all fell within the varied range of relevant factors that the Court could take into account, and so the DJ had not erred in taking them into consideration.

Simply put, the findings on appearance, purpose or intent by MCS put them ‘…on the wrong side of the line’. This is a case offering guidance applicable to other, similar cases.

If any registered charity employed as a business rates avoidance vehicle cannot produce credible evidence that it is living up to its charitable objects then they are leaving themselves wide open to court proceedings by Local Authorities and to the recovery of business rates.

You can read the full 34-page judgement here. My Community Space V Ipswich BC

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Another excellent and useful report

By Peter Scrafton

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