Councils have successfully defended a claim for billions of pounds of tax relief for NHS trusts.

The High Court has ruled that NHS Trusts and Foundation Trusts are not eligible for business rates relief this morning.

Derby Teaching Hospitals NHS Foundation Trust led a group of 17 trusts arguing that they should be treated in the same manner as charities, which receive relief on their business rates of 80%.

A group of 45 local authorities, including Derby City Council, defended the claim for a rebate dating back to 2010.

Mr Justice Morgan found that ‘a foundation trust is not established for charitable purposes only’ and ‘its purposes should be classified as governmental rather than charitable’.

Had the NHS trusts won the case, it would have cost council billions of pounds.

A Local Government Association spokesman said: ‘Today’s ruling is good news for councils and the local services our communities rely on across the country.

‘Councils, supported by the LGA, are pleased this common-sense decision will not see them having to pay NHS Trusts and Foundation Trusts £1.5 billion in unfounded backdated business rates relief nor see them eligible for 80% relief going forward.

‘Business rates, alongside council tax, are an extremely important source of income for local government so this would have huge implications for residents and the vital local services they rely on.’

A Charity Commission spokeswoman said: 'We welcome the considered judgment from the High Court, which makes clear that foundation trusts do not fall within the scope of charity.

'This was a significant case: charity has a distinct status in law and it also has a special meaning in the eyes of the public.

'It is crucial that this special status is protected for the benefit of the public.'