Trading subsidiaries might be able to claim charitable status after Scottish case

New Lanark
New Lanark

Charity trading subsidiaries in Scotland might be able to claim charitable status after the conclusion of a four-year legal battle involving a heritage charity. 

The New Lanark Trust is responsible for the former 18th century village in South Lanarkshire built around a cotton spinning mill, which is a Unesco World Heritage Site.

Following a series of cases in lower courts, the Court of Session ruled last week that the charity’s trading subsidiaries, New Lanark Hotels and New Lanark Trading, could be recognised as charities because they existed solely to support the trust’s charitable aims.

The Office of the Scottish Charity Regulator, which brought the appeal but had previously refused to grant charitable status to the two trading arms, said it was pleased with the decision.

The ruling means the trust can fight to reclaim £650,000 paid in non-domestic rates since 2015 and seek confirmation that mandatory and discretionary rates relief will apply in the future.

Charities qualify for mandatory business rates relief of 80 per cent, with the remaining 20 per cent often granted on a discretionary basis by the local authority.

Scott McCauley, chief executive of New Lanark Trust, said: “This provides much-needed clarity to our legal and financial status.”

“If and when the trust is reimbursed it will provide a much-needed boost in difficult times.”

The OSCR said it had registered New Lanark Hotels Limited and New Lanark Trading Limited as Scottish charities. 

A spokesperson added: “OSCR’s intention in bringing the appeal was to clarify the position in respect of its guidance on public benefit in charities.  

“We are pleased that the court has clarified that charitable status for these companies is in accordance with OSCR’s public benefit guidance.”

Calum MacNeill QC, from the law firm Westwater Advocates, represented both of the trading subsidiaries during the case. 

“The decision disrupts OSCR’s apparent view that trading subsidiaries shouldn’t be registered as charities,” he said. 

“The public benefit test will always turn on the individual entity's activities, viewed as a whole.”

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