NHS trusts launch High Court legal fight over business rates which private hospitals are exempt from

If successful, High Court action could require councils to pay back up to £2.4bn in business rates paid by hospitals since 2010

NHS trusts will take councils to court to argue they should be entitled to cut their business rates by 80 per cent, in the same manner as some private hospitals.

The High Court challenge by 17 NHS trusts, set to be heard on 4 November, could leave a gaping hole in public finances if it sets a precedent for hospitals and other bodies to be treated as charities.

Most public sector institutions are required to pay business rates on their buildings, however private hospitals and fee-paying schools have the option of registering for charitable status and pay just 20 per cent of the rate.

The legal challenge was launched last year in the wake of the 2017 business rates revaluation, which has already caused a 42.8 per cent rise in hospitals bills in the last two years.

Hospitals in England and Wales are expected to pay out £408.6m in 2019-20 alone, according to research by rates specialist Altus Group.

In 2017, Altus estimated 27 per cent of private hospitals are registered as charities and save around £52m a year as a result. Beneficiaries include major chains like Nuffield Health, which has 31 fee-paying hospitals and over 100 gyms, as well as the Hospital of St John and St Elizabeth.

The trusts, led by Derby Teaching Hospitals NHS Foundation Trust, have launched action against 45 councils with a preliminary hearing scheduled for 4 November.

Council budgets have been ravaged by years of austerity, and local authorities are already struggling to meet growing demand for social care, drug addiction services and anti-obesity measures.

If the High Court finds in favour of the NHS it could leaving a multibillion hole in budgets, and open the door for other public organisations to argue for charitable exemptions.

Robert Hayton, head of UK business rates at Altus, called on the government to sort out the dispute before bringing in expensive lawyers.

He added: “For many people it is iniquitous to treat NHS hospitals like businesses and expect them to pay normal business rates.

“If the case was successful it risks setting a precedent for other deserving public services, with the significant loss in revenue which goes to fund essential public services having to shift to businesses at the next revaluation in 2021 – at a time when the tax burden is already far too high.”

This financial year, hospitals such as the Royal London Hospital will pay £9.2m in business rates whilst the Queen Elizabeth Hospital in Birmingham and Bristol’s Southmead Hospital will pay £7.2m and £6m respectively.

Many NHS trusts, ahead of the 2017 business rates revaluation, said that they had to put additional cost efficiencies in place on top of the savings that they had already planned for, to ensure that they reached their financial control with no additional funding from government and specifically address the tax rises.

If successful, tax rebates for mandatory relief will be back dated to 1 April 2010, costing cash-strapped town halls and the government around £2.4bn overall, according to Altus.

The Local Government Association, which is representing the affected councils, retains the view that NHS trusts and foundation trusts are not charities and, therefore, not eligible for mandatory business rate relief.