Eleven NHS trusts have abandoned a five-year legal battle with local authorities over the business rates which they have to pay on hospitals.
A test case was brought by Derby Teaching Hospitals NHS Foundation Trust – now called University Hospitals of Derby and Burton NHS Foundation Trust – and 16 other NHS trusts had argued that they should be treated the same as charities.
A ruling in its favour would have seen hospitals receive a mandatory 80% discount off their business rates tax bill.
But the High Court ruled in December 2019 that NHS trusts were not charities under the rates rules, dashing hopes of a business rate rebate worth £2.35 billion backdated to April 1 2010 being handed back.
Of the original NHS trusts, 11 had said they would petition the Court of Appeal but the case has now been dropped, meaning hospitals will continue to pay full normal business rates.
Most private healthcare groups are entitled to the 80% rates relief discount because they are registered as charities, including Nuffield Health, which is the UK’s second largest charity by income.
Analysis of official Government data by real estate adviser Altus Group shows that NHS hospitals in England and Wales will pay a total of £423.02 million in business rates from April 1 for the 2021/22 financial year.
The Government is currently reviewing the business rates system and the final report of the “Fundamental Review” will be published in the autumn. The Government says that will set out the its priorities for reform and its longer term vision for the system.
Robert Hayton, UK president of property tax at Altus Group, said: “This is a classic situation of being legally right but, in the court of public opinion, morally wrong… it’s for the Government to legislate if it offends their conscience.”
The decision comes days after Chancellor Rishi Sunak was heavily criticised for ruling out Covid-related appeals worth approximately £4 billion, replacing it with a new £1.5 billion support pot.