In this post, Lisa Fox, a senior associate in the litigation team at CMS, comments on the decision by the Supreme Court in London Borough of Merton Council v Nuffield Health [2023] UKSC 18. The issue before the Supreme Court was whether Nuffield Health is entitled to mandatory relief from non-domestic rates in respect of its occupation of its members-only gym under the Local Government Finance Act 1988.

Factual background

Nuffield Health acquired Merton Abbey (“the Premises”) on 1 August 2016, when it bought the business of Virgin Active. It applied to the London Borough of Merton (“Merton”) for mandatory and discretionary rate relief. The application for mandatory relief was granted initially (representing 80% of the rates otherwise payable). However, following a visit by Council officers in November 2016, Merton withdrew the relief on the basis that the Premises was not being wholly or mainly used for charitable purposes.

Nuffield Health is a registered charity which operates for the following purposes described in its Memorandum of Association: “to advance, promote, and maintain health and health care of all descriptions and to prevent, relieve and cure sickness and ill health of any kind, all for the public benefit.” Amongst other things, it runs 112 fitness and wellbeing centres, including the Premises. The facilities at the Premises are primarily available to fee-paying Nuffield Health Gym members.

Decisions of the lower courts

The issue before the judge in the High Court was whether Nuffield Health is entitled to mandatory relief from non-domestic rates in respect of its occupation of the Premises under the Local Government Finance Act 1988 (“the 1988 Act”), s 43(6)(a), which applies where:

the ratepayer is a charity or trustees of a charity and the hereditament is wholly or mainly used for charitable purposes (whether of that charity or of that and other charities).”

The High Court found in Nuffield Health’s favour, holding that the charity is and, at all times since 1 August 2016, has been entitled to mandatory relief from non-domestic rates in respect of the Premises.

Merton appealed the High Court’s decision on four grounds:

  1. Ground 1: the judge was wrong to hold that Nuffield Health was not required to show that the Premises were being used for the public benefit, as an aspect of showing that the Premises were being used wholly or mainly for its charitable purposes.
  2. Ground 2: the judge failed to apply the correct standard of public benefit for Nuffield Health’s use of the Premises.
  3. Ground 3: even if the judge had applied the correct standard, the judge erred in his evaluation of whether the public benefit requirement was satisfied.
  4. Ground 4: the judge was wrong to conclude that the Premises were not being used wholly or mainly for fundraising.

Grounds 2 and 3 were contingent on Merton’s success on Ground 1, while Ground 4 was a free-standing ground.

By a majority (Lord Justices Jackson and Nugee, with Lord Justice Richards dissenting on Ground 1), the Court of Appeal dismissed Merton’s appeal. In respect of Ground 1 Lord Justice Jackson took a purposive approach and preferred the broader construction of the 1988 Act, s 43(6)(a) that treats the charitable purpose including the public benefit requirement as being part and parcel of the status of the charity ratepayer. Lord Justices Jackson and Nugee also preferred the arguments that local authorities are ill-suited and qualified to judge whether a charity is performing its responsibilities, and that the Charity Commission as regulator is best placed to do this. Lord Justice Nugee summarised that the question would be best framed, on the basis of statutory interpretation of the 1999 Act, s 43(6)(a) as whether the charity was using the premises for a purpose which is one of its charitable purposes (rather than whether the use constitutes the charitable purpose) [emphasis added].

Decision of the Supreme Court

The Supreme Court was asked to decide whether Nuffield Health is entitled to mandatory relief from non-domestic rates in respect of its occupation of its members-only gym under the 1988 Act.

The judgment was handed down by Lord Briggs and Lord Sales with whom Lords Kitchin, Hamblen and Leggat agreed, considering the intersection this appeal presents between charities and rating law, with public benefit being central to whether a purpose could qualify as charitable in the eyes of the law.

Charities Law

As a starting point the Lord Justices considered the principles under charity law relevant to the construction of the 1988 Act, s 43(6). There are two requirements under the Charities Act 2011 (“the 2011 Act”) to be established for a purpose to be deemed charitable, being: (i) that a body is established for the public benefit (mainly to be ascertained by reference either to its registration as a charity, or by reference to the body’s constitution, or its activities more broadly); and (ii) whether the body has any of the charitable purposes listed in the 2011 Act, s 3(1). The Supreme Court adopted the explanation of Nugee LJ in the Court of Appeal that the public benefit requirement in English charity law has two aspects to it:

  • the nature of the charitable purpose. For Nuffield, the purpose for which it is established is the advancement of health, and this satisfies the first aspect of the public benefit requirement; and
  • the scope of the public benefit. Meaning that the specified benefit is available to a sufficient section of the public, so that the provision of that benefit is for a public rather than private purpose.

The definition of the section of the public to which this benefit should relate, however broadly defined, will not be for the benefit of a sufficient section of the public if it excludes the poor (meaning those of modest means). The Lord Justices agreed that it therefore followed that the “scope” element of the public benefit requirement is satisfied by reference to the whole of the section of the public benefitted, rich and poor alike. This was correct, by reference to the analogy of private schools as reviewed in R (Independent Schools Council) v Charity Commission for England and Wales [2010] EWHC 2604 (Admin) (“ISC”). In that case the principle was explained in that the school is carrying out its public benefit requirement in providing education to all students, even those students paying full fees.

The Supreme Court also agreed with the Court of Appeal’s conclusion that only token provision was made for the poor at Nuffield’s Merton Abbey gym, but this did not interfere with the irrebuttable presumption arising from Nuffield’s registration as a charity that its health-related purposes, viewed overall, satisfied the public benefit requirement (ISC, para 195). The Supreme Court also flagged the distinction between (i) the fulfilment of the purposes of a charity and (ii) its lawful activities. The former is only a subset of the latter. A charity fulfils its purposes by doing what it was established to do. Those purposes must be exclusively charitable. In the present case that means, in a nutshell, promoting health. But most charities will also undertake incidental activities not directly concerned with the fulfilment of their purposes, but rather securing the continued existence of the charitable organisation. This might include, head office management, maintaining an investment portfolio, to name a few.

Construction of the applicable ratings law

The contention between the parties was whether the eligibility for ratings relief should be reached by a site by site assessment or whether it was adequate to demonstrate the body’s charitable purpose had sufficient connection to the activity at the site in question. The Lord Justices analysed the two-stage test under the 1988 Act, s 43(6):

  • Whether the ratepayer is or is not a charity; and
  • Whether the hereditament be used wholly or mainly for charitable purposes only.

For (i), Nuffield is a registered charity so this is satisfied (although consideration was given to the fact that it would be less straight forward if there was no registration and the constitution of the charity needed to be considered, or absent a conclusion there, an analysis of the ratepayer’s activities).

For (ii), the charitable purposes are the specific charitable purposes of the charity in question, rather than some generalised sense of charitable purpose.

It was the second stage of the test under ratings law that required an enquiry of sufficiently close connection of the sole or main use of the hereditament to the charitable purpose. The Supreme Court made it clear that such an enquiry does not require the rating authority to assume the role of the Charity Commission or the Court to decide whether those purposes are indeed charitable. However, given that it is understood that a charity cannot have non-charitable purposes, but can carry on other intra vires incidental activities, (e.g. fundraising, head office management, investment etc.) that they need not be in direct fulfilment of the charitable purpose or purposes.

On the facts of this case, the Supreme Court held that in light of Nuffield’s charitable purpose being the advancement, promotion and maintenance of health, Nuffield was found to use the Premises in direct fulfilment of the charitable purposes (agreeing with the Court of Appeal). This case therefore did not fall into the case of incidental activities as some of the case law considered, including ISC. What mattered in this case, was that the rich and poor benefitted from Nuffield’s activities in the round, even if the poor or a section of the public did not benefit specifically at the Merton Abbey gym (given membership pricing). It followed that the site was used wholly or mainly for its charitable purposes and the entitlement to mandatory relief from business rates was in tact.


The Supreme Court therefore upheld the decisions of the lower courts, although somewhat clarified the approach to be taken at this intersection between charity and ratings law, particularly in this case, where incidental activities to a charity’s purpose(s) were not in issue. This decision provides certainty to registered charities and ratings authorities alike that a site by site assessment is not required in order to establish entitlement. It is instead necessary to consider whether the premises are used wholly for the charitable purpose(s) or if there is sufficiently close connection between the sole or main use of the premises to the charitable purpose.