Local Authorities pitted against NHS Trusts in business rates battle

We seem to have a ludicrous situation developing across the country where we have cash-strapped hospitals pitted against local authorities in a battle over business rates.

According to the Guardian, at least 80 NHS trusts in England have written to local authorities claiming they are eligible for an 80% discount on business rates, thanks to a tax loophole that accounts for roughly half of the NHS acute trusts in the country.

The discount is worth up to £250m a year, but the Trusts are also applying to backdate it to the 2010 Rating List which means a final rebate bill of up to £1.5bn for the Government and Local Authorities (LAs) which currently share the rates revenues.

It is understandable that cash-starved NHS trusts needs to try and claw back every penny they can but this particular row is a stark example of how public sector departments are now being pitted against each other for dwindling funds in the wake of austerity cuts.

The NHS trusts are claiming they should be classified as charities, meaning they would be eligible for a tax break. Charities enjoy an 80% discount on business rates, which is the equivalent of council tax for non-residential tenants of property. Universities already qualify, as do some private healthcare providers such as Nuffield Health, which is registered as a charity.

However, NHS trusts have previously been considered as public sector-funded organisations rather than charities, partly because they have boards of directors rather than trustees.

LAs are not taking this lying down and the Local Government Association is seeking Counsel’s advice against the claims on behalf of its members. Whichever way we look at this we can expect a long and protracted legal wrangle, effectively between two taxpayer-funded entities – a fantastic use of public money that will inevitably end up in a test case sometime down the line.

It seems that everyone sees business rates as fair game; flood-hit businesses, the steel industry, high street retailers, doctors’ surgeries are all lining up. Business rates are not a magic cooking pot that continually spews out cash for those who say the right word. The tax is finite.

Cambridge city council, for example, has warned that the move by hospitals is one of the reasons that it plans to increase council tax by £5 this year. The council has been contacted by three trusts and says the cost of the six-year rebate would be £12m.

Each Local Authority will have to look at each application individually, but truly, what an almighty mess.