DCH 349 DCH National Trust
BUSINESS RATES AND THE NATIONAL
TRUST
A National Trust briefing
1. This briefing addresses current proposals
by the Valuation Office to assess the shops and restaurants operated
on National Trust properties as liable for business rates. The
financial consequences of this would be severe (estimated at between
£900,000 and £3.9m over the last 3 years, compared to
the Trust's budgeted operating surplus of £2.6m for 2003/4),
and significantly reduce the ability of the Trust to undertake
its charitable objectives.
2. The Valuation Office's proposals have significant
implications not only for the Trust, but also for other charities,
public bodies and museums, such as the National Gallery, RSPB,
Historic Royal Palaces and the Wildfowl and Wetlands Trust. This
has an impact on the Government's wider support for the charity
and not-for-profit sector and for social enterprises.
The legal issue - separate hereditaments?
3. The National Trust does not pay rates on
most of its historic houses. To date the Trust has not been expected
to pay rates in respect of those parts of the properties which
are used as shops or restaurants, since they were considered to
be an integral part of the property. The Valuation Office is
now proposing to assess the shops and restaurants for business
rates on the grounds that they are run by the Trust's wholly owned
trading company, National Trust Enterprises (NTE), rather than
the Trust itself, and should therefore be treated as separate
"hereditaments" for rating purposes.
4. The Trust believes that this would be wrong,
both in law and in principle. The shops and restaurants have
two purposes, both of which directly support the work of the National
Trust: they encourage visits to National Trust properties, by
making visits more enjoyable, and they provide additional income
to offset the costs of caring for the property where they are
located. As such the Trust firmly believes that it is inappropriate
to seek to make a distinction between them and the rest of the
property.
5. The proposal to rate separately the shops
and restaurants assumes that they are controlled and occupied
by NTE rather than the Trust. The Trust does not believe the
facts support that assumption:
- they are managed as one unit with the
property, under the control of the same Property Manager, employed
by the Trust
- the Trust dictates where the shops and
restaurants should be sited, whether they should be relocated,
and when they should open and close, according to what fits in
with appropriate visitor patterns for the rest of the property
- many of the shops and restaurants can
only be accessed after paying to get in to the property, or producing
a membership card
- the profits from the shops and
restaurants (less a small proportion to cover central overheads)
are accounted for as income of the main property and offset losses.
6. In our view, the Valuation Office's previous
view, that the shops and restaurants are in the same occupation
as the rest of the property, is correct. They form an integral
part of the property and it is not realistic to seek to distinguish
between them.
7. The Trust pays rates on its High
Street shops and, since these operations are distinct and separate
from the Trust's properties, accepts that position.
The issue of principle - Government support
for the charity sector and social enterprise
"In the modern world it is
simply not possible to have a dynamic and vibrant society and
economy without a dynamic and vibrant voluntary sector….government
has an important role to play in providing support….more
needs to be done"
Rt. Hon Tony Blair MP, Prime Minister,
Foreword, Private Action, Public Benefit¸
Strategy Unit September 2002
"I believe it is important that the Government
seeks to do all it can to help the future development of social
enterprise. Our vision is bold: social enterprise offers radical
new ways of operating for public benefit….we aim to provide
a more enabling environment."
Rt. Hon Tony Blair MP, Prime Minister,
Foreword, Social Enterprise: a strategy for success, DTI,
February 2003
8. The Government is keen to support
and develop the potential of the charitable and not-for-profit
sector. The July 2003 response to the Strategy Unit report Private
Action, Public Benefit makes proposals for modernising the
law and improving support and the Government has also taken action
to provide further support through the tax system (e.g. extension
of Gift Aid and tax relief on gifts of shares). Government support
for social enterprises - businesses with social/environmental
objectives that re-invest surpluses in the business or community
to support these objectives - is also growing and the National
Trust's operations through NTE are a good example of this. The
Valuation Office's approach to business rates in relation to the
charity and not-for-profit sector and to social enterprises needs
to be consistent with this approach.
9. The fact that it is not realistic to make
a distinction on the ground between occupation of the Trust's
shops and restaurants and the rest of the property is mirrored
in the general relationship between the Trust and NTE. Whilst
NTE is legally a separate entity, at an operational level it is
managed as one with the Trust. Its planning and budgeting is
integrated with that of the Trust, all staff working in shops
and restaurants are seconded from the Trust, and the product lines
available in shops and restaurants are controlled by the Trust.
NTE is wholly owned by the Trust, exists solely to support the
Trust, and pays the whole of its profits to the Trust.
10. Restaurants and shops at Trust
properties provide direct financial support to the properties,
helping to offset the cost of caring for the property. Making
them liable for business rates would have a direct and severe
impact on their ability to do this, and would conflict with wider
Government moves to offer greater support to charities and social
enterprises (e.g. "The Government is determined that the
regulatory, tax and administrative framework should not hinder
the development and growth of social enterprise" Social Enterprise:
a strategy for success, DTI, February 2003). The Trust provides
well-recognised public benefits from its activity in protecting
the natural and historic environment and providing public access.
It also brings significant social and economic benefits. Direct
benefits include an estimated 5-9 additional full time equivalent
jobs being generated by each National Trust job and our role as
the provider of the nation's largest out-of-school classroom with
600,000 education visits each year. Indirect benefits include
the fact that an estimated 60-70% of rural tourism depends on
the sort of high quality environment which the Trust helps to
provide.
Conclusion
11. The shops and restaurants operated
for the Trust by NTE on Trust properties should not be liable
for business rates. The catering and retail activity there is
inseparable in management terms from the operation by the National
Trust of the rest of the property and they provide an integral
part of the visitor's experience of Trust properties. The severe
financial impact is also inconsistent with the Government's moves
towards providing better support for the charitable and not-for-profit
sector and social enterprises and would have implications for
a large number of other charities that run similar operations.
July 2003
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