A charity is likely to face claims of nearly £2m in underpaid business rates following a ruling from the High Court, and could be subject to further claims in future.
The Public Safety Charitable Trust lost its legal dispute with three councils over unpaid business rates on Tuesday.
The charity has 2,000 leases for a peppercorn rent on properties in 240 local authority areas, and installs technology in the properties to transmit public safety text messages to mobile users in the vicinity. The messages are sent on behalf of organisations including police forces and the charity Embrace, which supports child victims of crime, according to Mark Ferguson, the PSCT’s chair.
Charities receive mandatory discounts of 80 per cent on business rates if the property is used wholly or mainly for charitable purposes and councils are able to offer a discretionary discount on the remaining 20 per cent.
But three councils – South Cambridgeshire, Milton Keynes and Cheshire West and Chester – disputed giving the PSCT the mandatory discount.
The councils did not accept that the buildings containing the equipment were being used wholly or mainly for charitable purposes and court proceedings followed.
South Cambridgshire District Council and Milton Keynes Council won local court cases against the charity but the charity appealed against the decisions.
In Cheshire West, the charity won its case but the council appealed. All three appeals were sent to the High Court and were dealt with together by Mr Justice Sales.
In a written judgment, he ruled that the charity was liable for full business rates on the basis that the properties were "mainly unused".
Cheshire West and Chester Council said the judgment meant the charity was liable for £1.4m in unpaid business rates on 70 properties over the past two years.
But it also said that the case must now go back before Chester Magistrates’ Court, where the council originally lost its case last summer, for it to reconsider its earlier judgment before it can be enforced.
South Cambridgshire said the charity must pay it nearly £350,000 in business rates and a further £15,000 in court costs, while Milton Keynes Council said the charity would have to pay it £48,000 plus more than £25,000 in court costs.
The charity’s accounts for 2011 show it had an income of £1,665,046 and spent all but £45,000 of that sum.
A spokeswoman for the Charity Commission said it had opened a regulatory compliance case into the charity in October 2011, which was ongoing.
"Concerns have been raised with the commission in relation to the Public Safety Charitable Trust regarding business rates relief," she said. "In October 2011 the commission opened a regulatory compliance case into the charity and we are currently investigating the charity to explore these issues further."
Ferguson said he was taking legal advice following the High Court decision and that eight other councils could now bring cases against the charity.
But he said he was unclear about how much the charity could be liable for in the short term, saying that South Cambridgeshire Council had only pursued a liability order for £30,000 against the charity on a single property.
"We’re in 240 different councils and the vast majority grant us charitable relief," said Ferguson.
He said the charity could be liable for "a high figure" across all councils but declined to confirm how much that might be.