Taxpayers landed with £650,000 bill over New Lanark charitable status row

The trust is now going to fight to reclaim £650,000 in non-domestic rates due to its charity status, and seek confirmation that mandatory and discretionary rates relief will apply in the future.

Charities qualify for mandatory business rates relief of 80%. The remaining 20% may be and often is granted by the local authority.

New Lanark Hotels, which operates the 38 bed Mill Hotel, eight self-catering Waterhouses, a hostel and leisure suite and New Lanark Trading Limited, which operates the former 18th century village built around a cotton spinning mill, had been refused charitable status around three years ago.

READ MORE: New Lanark World Heritage Site: how it was almost lost forever

The Office of the Scottish Charity Regulator (OSCR) refused applications for charity status in 2018, because it believed "a significant proportion" of the activities were "not in furtherance of charitable purposes and, as a result, the applicants did not meet the public benefit element of the charity test".

Last month the OSCR failed in a bid to overturn a finding made by specialist judges sitting in an Upper Tribunal to reverse a decision that allowed the two firms to have charitable status.

It was under the enlightened management of Robert Owen that New Lanark became famous.

He first visited in 1798 and after negotiating its purchase he began to innovate, opening a village shop, and used co-operative principles to buy and share provisions at relatively low cost to residents.

The 19th-century reformee described the community he created at New Lanark "the most important experiment for the happiness of the human race that has yet been instituted at any time in any part of the world".

After he left, the site was purchased by a succession of individuals and companies.

The New Lanark Trust was set up in 1974 with the aim of restoring and regenerating the site, including the houses, as "a living and working community".

In 2001 New Lanark was awarded world heritage status by Unesco.

In a 2019-23 management plan the trust states that it supports the site's evolution as an "exemplar" of social housing.

It is located close to the Falls of Clyde, which have inspired artists and poets including Wordsworth, Coleridge, Turner and, more recently, Alasdair Gray.

But a row with the charity regulator blew up after the OSCR insisted that two of its key companies shouldn’t be allowed on to the register because it believed the two companies were private enterprises.

Upper Tribunal judges believed that even although the companies were engaged in commercial activity, the firms still helped enhance the charitable status of New Lanark.

The OSCR argued that the Upper Tribunal decision was mistaken and it should be quashed.

The issue was over whether activity that was commercial in nature could also further charitable purposes and thus assist hotels to meet the public benefit test.

It accepted that some of what it did was in furtherance of charitable purposes – for example, some maintenance of the occupied buildings and environs and offering discounted accommodation to interns, academics, students and conference guests.

But it said these activities were “outweighed by its solely commercial activities”, such as offering overnight accommodation to visitors with associated services, and leisure club facilities for residents and non-residents.

The Inner House disagreed and in a judgement Lady Dorrian wrote: “The main purpose was to enhance the presentation of New Lanark as a living village, contributing to the visitor experience which has given the site its reputation.

“The accommodation enabled visitors to immerse themselves more fully and for longer in the historic village and to stay in one of the historic buildings; and the hotel business provided a means of the historic buildings being occupied in a useful way which contributed to maintaining the village’s life and economy."

Now the Trust is to have talks with the Scottish Government and the local authority to reclaim non-domestic rates, paid since 2015 as result.

They say the judgement now means that all visitors will be "directly supporting charitable activity at New Lanark when they visit and enjoy all we have to offer."

It said that it allows them to plan for the future with "greater confidence" to implement the plans for both the World Heritage Site and the local area through "partnership working".

New Lanark Trust chief executive, Scott McCauley, 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. We are excited that all our visitors, whether they come to learn, stay, eat, or shop, will be directly supporting New Lanark and our charitable purposes."

New Lanark Trust chairman Bill Howat, added: “We knew we had a strong legal case given the unique setting of this historic village and its designation as a UNESCO World Heritage Site. This decision will help us to continue developing our plans for a sustainable future with our partners."

An OSCR spokesman said: "We note the decision of the Court of Session and have now registered New Lanark Hotels Limited and New Lanark Trading Limited as Scottish charities. The Court’s judgement rest on the facts in the case and emphasises the unusual (and almost unique) nature of the activities undertaken on the New Lanark World Heritage site.

"The OSCR’s intention in bringing the appeals was to clarify the position in respect of the assessment of public benefit in the charity test. We are pleased that the Court in its decision has done so and has clarified that charitable status for these companies is in accordance with OSCR’s public benefit guidance."