Councils could face a wave of claims for business rate refunds from NHS foundation trusts in cases that revolve around whether trusts should enjoy the mandatory rate relief accorded to charities and certain other bodies.

One district is understood to have received a claim worth £9m and the District Councils Network has warned of a “potentially punitive financial impact” on councils, HSJ’s sister title Local Government Chronicle reports.

NHS estates

NHS estates

Backdated claims by trusts could be worth ‘hundreds of millions’

Property consultant Bilfinger GVA is acting for a number of trusts in these cases.

A company brochure called Taking Care of NHS Estates said it has saved NHS trusts in excess of £100m “through rateable value reductions, the forensic examination of previous rates payments and other highly lucrative rating initiatives which have gone unnoticed by our competitors”.

A Bilfinger GVA statement said: “Following a concern raised by an NHS trust client, we have undertaken research into the application of mandatory rate relief, and have sought legal opinion on the issue.

“As a result, we have made applications for relief on behalf of a number of our NHS trust clients‎. It would not be appropriate for us to comment further at this stage.”

Adrian Jenkins, a director at Pixel Financial Management, told LGC the costs could run into “hundreds of millions of pounds if claims are backdated”.

He said: “It mainly concerns foundation trusts claiming they should enjoy the status of charities, and to be treated more favourably than other parts of the NHS.”

Mr Jenkins said previous opinions had said that foundation trusts should be treated as public bodies - not as charities - despite their semi-independent status since they were accountable to Parliament and paid for by public money.

“Unless the government steps in, this has every chance of going to the High Court and possibly the Supreme Court,” he added.

“That could take two or three years during which time councils will face uncertainty and so want to build up their reserves.”

Councils must bear the costs of year on year losses in business rates of up to 7.5 per cent before they receive compensation under the safety net system for any losses in excess of that. 

A DCN spokesman said: “The network acknowledges, from representations made to us, some serious concerns about the potentially punitive financial impact of these appeals, which could have serious consequences on attempts by councils to drive crucial business rates growth.

“The DCN is working to understand and assess the possible scale of the situation and protect the interests of our 200 members.”

The Department for Communities and Local Government had not responded by the time of publication.