A group of 20 NHS hospital trusts has launched a legal bid for business rates relief in a landmark case that could save under-pressure hospitals nearly £300 million a year.
The trusts have begun court proceedings against 49 local authorities seeking to be treated the same as private hospitals for tax relief.
More than one in four of all private hospitals in England and Wales are registered as charities, allowing them to enjoy 80% relief on their business rates bills, while NHS counterparts have been hit with crippling hikes after the recent tax overhaul.
There is a preliminary hearing of the case on Thursday, where a judge will issue directions in the case.
If successful, the legal challenge could save NHS hospitals £293 million a year in business rates, according to real estate adviser Altus Group.
But the Local Government Association (LGA), which is supporting the councils involved in the case, has warned the legal bid could threaten the financial viability of some local authorities.
The LGA has already reportedly branded the hospitals’ challenge as “corrosive”.
Labour’s shadow minister for local government Jim McMahon told the Commons last month that councils had put aside £1.6 billion for backdated payments over six years in case the appeal is successful.
It could also open up a raft of similar cases over controversial charitable status, in particular for state schools.
Local authority-funded schools are charged business rates in full, while more than half of all private schools in England and Wales are registered as charities and are enjoying mammoth subsidies on their bills.
Mr McMahon said: “Last month I implored the Government to work with the LGA to make sure this issue was addressed, and the Minister agreed that working through Parliament rather than the courts was the best approach.
“Instead, we have an ‘us-versus-them’ scenario, and which could risk creating further legal challenges from other public sector bodies if the Government doesn’t take action.”
The hospital trusts involved in the case, which are being represented by law firm Addleshaw Goddard, include York Teaching Hospital NHS Foundation Trust and Norfolk and Norwich University Hospitals NHS Foundation Trust.
NHS hospitals are forking out £366.2 million a year on average in business rates – a hike of £62.8 million following the revaluation last April, according to Altus.
But private hospitals are enjoying a £52 million tax break on their business rates bill over the next five years through their charitable status.
The Queen Elizabeth Hospital Birmingham Trust – whose hospitals were among those that faced the largest hikes in rates bills last year – has previously spoken out against the tax status for NHS facilities.
It said last year there was “an anomaly in how NHS Trusts are treated for business rates when compared to other organisations such as universities, charitable care facilities and private hospitals”.