The Charity Commission has announced an inquiry into a charity over a decision to occupy vacant commercial premises and potentially become liable for business rates.

Manchester charity Life Foundation Trust, which has now closed down, is the fifth charity to be investigated over its involvement in potentially using charitable relief from business rates for tax avoidance.

The charity was registered in 2012, and has never filed accounts with the Commission.

The government provides an 80 per cent mandatory relief from business rates on any property which is being occupied “wholly or mainly” for charitable purposes and local councils can offer a discretionary 20 per cent relief. Councils are responsible for administering applications for the relief.

Several landlords who own empty property and are eligible for the rates on that property have entered into agreements with charities where the charity occupies the premises, claims the relief, and reduces the landlord’s bill. In exchange, the charity receives a donation.

Charities previously argued that a tokenistic occupation was sufficient for the relief, but a judge ruled last year, in the case of the Public Safety Charitable Trust, that charities were not liable for the relief if the properties were “mainly unused”.

The PSCT is also under investigation over business rate relief arrangements, as are the Augustine Housing Trust, the Africa Relief Trust, and the Kenya Aid Programme.

“The regulator is investigating concerns about the trustees’ decisions to enter into agreements by the charity to occupy vacant commercial premises, resulting in the charity becoming potentially liable for the payment of significant business rates,” a Charity Commission spokeswoman said.

“The inquiry will examine whether the trustees have properly discharged their legal duties including timely filing of the charity’s annual accounts and returns and whether, and to what extent, there was mismanagement or misconduct in the administration and management of the charity on the part of the trustees.”