NHS foundation trusts are not charities, High Court rules

The Charity Commission has welcomed a High Court ruling that prevents NHS foundation trusts from becoming charities.

Seventeen foundation trusts brought the case, which was worth a possible £2.4bn in business rate relief.

But in his judgment, published last week, Mr Justice Morgan accepted arguments, including those of the commission, against the move.

"I conclude that a foundation trust is not established for charitable purposes only and therefore the preliminary issue should be answered by holding that a foundation trust is not a charity," the judgment said.

A spokeswoman for the Charity Commission said it welcomed the decision.

"This was a significant case: charity has a distinct status in law, and it also has a special meaning in the eyes of the public," she said. "It is crucial that this special status is protected for the benefit of the public."

Morgan praised the "excellent submissions" of Christopher McCall and Naomi Hart, the two lawyers who acted on behalf of the commission, saying their contributions "were of great assistance to me".

The regulator was an "intervener" in the case, meaning it advised the court on aspects of charity law rather than acting for either side. 

The commission spokeswoman said the regulator spent almost £30,000 plus VAT on barristers for the case, although most of the legal work was carried out by the commission’s in-house lawyers.

At the five-day hearing in November, each of the 17 claimants asserted they were a charity and their property was wholly or mainly used for charitable purposes.

Had this been accepted they would have been entitled to an 80 per cent discount on business rates, in line with the rates charities pay under existing legislation.

Amanda Tipples, acting on behalf of the 45 defendants, said there was a fundamental reason why a foundation trust could not be a charity.

"She described a foundation trust as a cog in a machine, where the machine was the whole complex of connected bodies which made up the NHS," the judgment said.

"She submitted that the purpose of providing the services of the NHS was not a charitable purpose because it was more accurately regarded as a purpose of government."

Tipples said it was a fundamental requirement for a charity that its assets be dedicated to charitable purposes in perpetuity.

It was therefore not possible to have a trust for charitable purposes for a fixed period or until the happening of an event, she added.

Christopher Tidmarsh, acting for the claimants, disputed this, saying that, in the case of a corporation, the corporation had to be "established" for charitable purposes only.

Derby Teaching Hospitals NHS Foundation Trust, which led the claim, would have been able to recover business rate relief in excess of £17m for the previous six years, had the ruling gone in its favour.

This could have also opened the door for the other 67 foundation trusts in England to bring backdated claims.

"If every foundation trust in the country were to claim repayment of the rates it had paid in the last six years, the sums involved would be very significant," the judgment said.

Kevin Downs, executive director of finance and performance at University Hospitals of Derby and Burton, of which Derby Teaching Hospitals NHS Foundation Trust became part last year, said: "We are one of 17 trusts that decided it would be in the interest of our patients to be involved in a national review to test the possibility of NHS foundation trusts receiving rating relief, which is money that could be spent improving services for our patients.

"We will take further advice from the legal team, who are representing the 17 trusts involved, on next steps."

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