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Spotlight Working with the Not-for-Profit Sector Summer 2007

Contents 1–2 Integrated Asset Management Planning 3

School Minibuses and Drivers Hours Rules

3

INTEGRATED ASSET MANAGEMENT PLANNING Could it Save You Money?

Client Focus - Houseold Cavalry

4

Budget 2007

5-6

Registration in Scotland

6

Digest - Stone King News

Property is increasingly acknowledged as representing any organisation's second or third biggest operating cost after staff. It is often its most valuable fixed asset whilst at the same time having the potential to be its most expensive liability. For the majority of organisations within the Charity and Education sector, property is not their core 'business' with its primary function being to provide accommodation for staff and customers.

and its operational performance, due to

There is the added complication that the

the extent to which the environment

property market is highly imperfect and

provided by property impacts upon its staff,

does not typically provide the ideal type or

Nearly half of all occupier property

customers and wider third party image. So

size of property, in the desired location.

forecasts are reported as being inaccurate

in addition to having the wrong amount of

This highly imperfect supply situation

by more than 100% as occupiers often

property, having the wrong type of property

coupled with the time, expense and

massively over or under estimate how

will also have a significant negative impact

'business' disruption (e.g. the negative

much accommodation they require.

on any organisation's performance.

impact relocation uncertainty has on staff

Clearly, too little will lead to significant operating risk, and too much will result in an organisation wasting money.

In addition to the direct negative consequences of occupying the 'wrong' amount and type of property, property is a complex asset to acquire or dispose of and

between an organisation's accommodation

so rectifying a deficit or excess is usually a costly and time consuming exercise.

of actually moving) associated with transacting, be it either disposing of and/or acquiring property, requires that organisations proactively, effectively and efficiently manage their property to avoid it

â–˛

There is a growing appreciation of the link

and customers, and the physical disruption


Integrated Asset Management Planning Could it Save You Money? Continued

“One solution is to identify risks and opportunities in advance by the creation of an asset management plan”

support (e.g. expansion, contraction,

their most positive assets.

and/or organisational change or re-

being a liability, and instead make it one of

A. What is integrated asset management planning? It is fair to say that the principle of 'if it isn't broken don't try and fix it' is often applied to property, insofar as it is managed reactively according to property actions (e.g. repair and maintenance issues, a landlord exercising a lease clause) or organisational pressures (e.g. a requirement to reduce costs, release capital, provide accommodation for expansion or dispose of accommodation due to contraction). Whilst this approach may seem attractive, particularly to management teams who probably already have too much to do, it leaves any organisation exposed to either missing an opportunity and/or being presented with an unforeseen business continuity risk. One solution is to identify risks and

branding). An accurate, up to date and comprehensive understanding of an organisation’s property requirements (sometimes referred to as a demand profile) will enable a property focused action plan to be put in place, to procure and manage the necessary accommodation. B. What benefits can it offer? The objectives and requirements of any organisation will be unique and will depend on its operational and property

As a tool it offers the senior

characteristics. However, summarised

management team the opportunity to

below are some of the main benefits

develop medium and long term property

available to any organisation from the

strategy frameworks.

development and implementation of an integrated property asset management plan.

A thorough understanding of an organisation's accommodation requirements will highlight what

Identify immediate opportunities to

accommodation is necessary and

an asset management plan. Whilst this

reduce property costs through the way

support the procurement of property

may seem obvious its benefits should not

accommodation is procured.

which provides an environment

opportunities in advance by the creation of

be underestimated. However its creation

consistent with the occupational Identify any immediate risks (e.g.

will require the initial input and ongoing

demands of its staff and customers.

maintenance and repair obligations)

involvement of senior management as it

Equally, the organisation may benefit

presented by the current property base.

from an increased awareness of the

Improve management information and

ongoing changes to the way workspace

business reporting to fully illustrate the

may be configured and managed (eg.

financial extent of the property asset

remote working, hot desking,

base. This presents the opportunity to

accommodation configuration).

will need to evolve as the charity does. An occupational property asset management plan should be based on an organisation's core operating requirements and objectives. For example, how much accommodation is required now and in the future, what type and characteristics of accommodation are required, and what are the wider organisational considerations which the property asset base should

demonstrate the value added to an organisation from effective and efficient

Charlie Foster, Grant Thornton UK LLP

asset management initiatives, and enables fully informed property related decisions to be made.

charlie.foster@gtuk.com


School Minibuses and Drivers Hours Rules The EU drivers hours rules changed on

if they are used for the non-commercial

11th April this year and the law regarding

carriage of passengers in the UK.

when EU drivers hours rules must be

Whether the carriage of passengers is

observed and tachograph equipment

non-commercial is a moot point.

fitted to various vehicles has been

However an initial indication from the

clarified and amended. This has an effect

Department of Transport has suggested

upon schools most notably in relation to

that teachers will be considered

the use of minibuses. The law now is that

volunteer drivers, and therefore driving

a minibus with up to 9 seats (including

on a non-commercial basis, provided

that of the driver) will be out of scope for

they are not required to drive the vehicle

drivers hours rules and will not require a

as part of their employment contract and

need to be recorded on a tachograph.

tachograph to be fitted.

are not paid for doing so. Any journey

Any vehicle, therefore, of that size will

A minibus with between 10 and 17 seats including that of the driver will not require a tachograph to be fitted and will be out of scope insofar as EU drivers hours regulations are concerned but only

involving a vehicle of between 10 and 17

need tachograph equipment to be

seats that includes travel to another EU

installed if it is to undertake work

member state will however come within

outside the UK and in another EU

the scope of the EU drivers hours

member state.

regulations and, therefore, that work will

Andrew Banks

Client Focus

Household Cavalry Museum The Household Cavalry’s current

the Life Guards, the Royal Horse

museum is located in Combermere

Guards or the Royal Dragoons.

Barracks, Windsor, home of the Household Cavalry since 1802. It was established in 1963 to house the Regimental collection of uniforms, medals, weapons, horse furniture, textiles (banners and standards) and one of the finest collections of ceremonial uniforms in the world. We hope to have the collection designated as of national significance because of the rarity of many items. In these days of family history research, our archive, considered the most complete of any in the British Army, is very important. It includes personal records of many who have served in

Six years ago, it was decided that the Museum would move from its current location because long-term MOD funding was not guaranteed. It also had to be seen by more of the public who felt discouraged from visiting

on Horse Guards on 12th June and its opening to the public on Monday 9th July.

because it was behind the wire of the

This hugely exciting project, bringing

barracks. Therefore, a bold decision

as it does a new visitor attraction right

was taken to re-establish it in one of

into the heart of ‘Royal’ London, now

London’s most historic buildings,

faces the challenge of covering

Horse Guards, home to the Army since

outstanding loans of about £1 million

1750. The project has cost nearly £5

so that it can face the future financially

million and comes to fruition this

secure.

summer with the official opening by

Advance tickets for the Museum can be

Her Majesty The Queen at a Pageant

booked on 0207 7667330.


Budget 2007

“Overall this has not been a landmark budget for the charity sector”

1. Gift Aid

2. VAT – New Buildings

The headline of the budget – reducing

Deep in the small print of the budget is a

income tax from 22p to 20p in the pound

potentially significant change to the VAT

– has also proved to be a headline in

position for charities who are

terms of the budget’s impact on

constructing new buildings or who are

charities, but for more negative reasons.

reconstructing or altering listed

The central mechanism of Gift Aid is that charities who receive Gift Aid donations can claim back from HMRC the amount of basic rate income tax that the donor has already paid on the amount of the donation. As a result of the reduction in income tax charities can now only claim 25p in the pound rather than 28p. Whilst it is estimated that this will result in a

buildings (or have done either in the last 3 years). Previously, charities could only obtain zero-ratings for new buildings or construction services where the building

buildings. For any charities that have

would be used solely for a relevant

undertaken such a ‘change of use’ in the

charitable purpose. Importantly, where

last three years, they can now obtain a

there was any change from this position

refund for any VAT that became due

within ten years after the construction

under the previous rules.

work the zero-rating could be lost and HMRC could claw back VAT that was

3. Community Organisation Fund

previously not due.

The Chancellor also announced a new

estimated £700m of potential

The change is that charities will no

£80m fund to provide small grants to

reclaimable tax that charities are not

longer become liable to VAT where there

community groups. The fund is an

currently claiming.

is a change of use within ten years of the

attempt to help bolster the grass roots

zero-rating being obtained providing that

of the third sector where, the

the change of use was not anticipated at

government acknowledges, small

the time of obtaining the zero-rating.

community level groups undertake a

Example

addressing local needs. The fund will be

A new sports hall was built by a ‘sports

split over four years and given out by

charity’ for its charitable purposes and

local grant makers who, it is hoped, will

zero-rating was obtained on this basis. If

be in the best position to know the local

five years later the charity thought that

market in terms of what will and what

actually it would be sensible for 20% of

will not be an effective use of the money.

its use to be made available to the wider

Overall this has not been a landmark

community, for example allowing an

budget for the charity sector. Welcome

orchestra to practice and perform and

changes to Gift Aid benefits for larger

holding school examinations, then the

donations, grant making opportunities

charity would now be free to do this

and VAT on buildings have been off-set

£71m drop in reclaimable Gift Aid the Treasury’s main concern remains the

The budget also altered the allowable benefits for Gift Aid donations over £1000. Gift Aid is only available where a genuine donation, as opposed to a payment for goods or services, has been made. Previously when a donation of over £1000 was made any benefit received by the donor could be no more than 2.5% up to a cap of £250. Where benefits exceeded this limit the donation could not be treated as a Gift Aid donation and tax could not be claimed back by the charity. These thresholds have now been doubled so that donors making Gift Aid donations of over £1000

wealth of unique and effective work in

without worrying about having a new VAT

by a reduction in the amount of Gift Aid

liability.

charities can claim back. It seems

£500. The thresholds for allowable value

This is a welcome reform of the VAT

nothing has been given away as to the

of benefits for donations under £1000

regime for charities and it is thought to

role of the sector if the Chancellor

remain at 25% of a donation for

be particularly aimed at academies, as it

moves next door.

donations up to £100 and £25 for

will allow charities to have greater

donations between £101 and £1000.

Matthew Waters

confidence in deciding to construct new

may now receive benefits of up to 5% of the value of the donation up to a cap of


Registration in Scotland A touch of cross-border disorder? As discussed in a previous issue, new Scottish charity legislation means that charities registered in England and Wales are required to register in Scotland if they have qualifying operations in Scotland, and wish to continue to operate as a charity north of the border. Difficulties with Registration English charities applying to register, whose governing documents contained references to “charitable purposes,” may have found themselves in receipt of a polite letter from the Office of the Scottish Charity Regulator (OSCR) asking them to amend their governing

“…the current legal definition of what constitutes a charitable

documents. OSCR requested that

purpose in England and Wales is already different to that

“charitable purposes” should be defined as purposes charitable under both the laws of England and Wales and Scotland. Failure to amend would result in the charity failing the Scottish charity test, and being ineligible for registration in Scotland. This approach was apparently approved by the Commission. Since the current legal definition of what constitutes a charitable purpose in England and Wales is already different to that under Scottish law, this requested change would have the effect of narrowing the purposes of the English

under Scottish law…” in the Public Benefit test between both

action against charities in this category if

jurisdictions, and Scotland has

they continue to operate in Scotland and,

introduced a concept of disbenefit which

where requested, they are placing such

is to be taken into account when

applications on hold, subject to the

analysing whether activities are

provision of any other information which

charitable.

may have been requested.

Implementing the suggested changes

Since the test for charitable tax relief

would mean that the English charities

throughout England, Scotland and Wales

affected would need to have regular

is based on the English legal

Scottish advice in order to operate, with

interpretation of charitable purposes,

the added costs this would entail.

failure to register in Scotland should not affect general tax reliefs. However rate

charity in all its operations (not just in

Because of the significant nature of the

Scotland). This is because any English

changes being requested many charities

charitable purpose which is not also

and their advisers (including us)

recognised in Scotland would be

complained, to OSCR and the Charity

On the whole though English charities

excluded (and vice versa). Whilst some

Commission, that these changes were

can continue operating in Scotland for

may consider the current differences

unacceptable.

the time being, provided they have

between the two jurisdictions as minor (e.g. Advancement of the Armed Forces is

Current Status

relief is at the discretion of local councils, and may be affected.

applied to register with OSCR. Way forward

not a charitable purpose in Scotland),

The result of so many complaints has

both jurisdictions interpretation of

been that OSCR and the Commission are

It is possible that a political solution can

revisiting this issue and we await the

be found, as the Scottish Ministers have

outcome of their deliberations. In the

the power to exempt certain categories of

start to appear. There is also a difference

meantime OSCR has agreed not to take

charity from requirements of the Scottish

charitable purposes are set to evolve separately, and wider differences may


legislation, but this would need the political will to see it through, and it seems at least possible that OSCR and the Scottish Executive will not back down. If they do not, there would appear to be three possible outcomes: 1. The Commission might split a charity’s

Digest – Stone King News New People

enterprise and other not for profit

Sally McFadden joins our commercial property team as an associate having

trusts in two by Scheme, creating two

practised in Birmingham for the past

trusts – one Scottish compliant and one

9 years at Wragge & Co, Anthony

English compliant;

Collins and Martineau Johnson.

2. The affected charities could each establish a separate entity in Scotland; or 3. The original proposal by OSCR to amend the English charity’s constitution might be accepted and one

Sally’s practice areas include landlord and tenant issues, retail and licensed property work, development projects, investment property acquisition and management, and security and lending work for clients from the commercial and charitable sectors.

would trust to a degree of pragmatism CICs

regulators.

Stone King LLP has just set up a new

The outcome will undoubtedly show us

community interest company named

just how independent Scotland intends

The Bridge Rehabilitation Community

to be over its charity law and what level

Interest Company which will offer

of understanding exists between the two

residential addiction rehabilitation

charity regulators.

services. Community Interest Companies are a new form of company designed for social

Your Contacts

Stone King LLP 13 Queen Square Bath BA1 2HJ Tel. 01225 337599 Fax. 01225 335437 28 Ely Place London EC1N 6TD Tel. 020 7796 1007 Fax. 020 7796 1017 Wellington House, East Road, Cambridge CB1 1BH Tel. 01223 451070 Fax. 01223 451100

Charity: Michael King Partner Robert Meakin Partner Ann Phillips Partner Jonathan Burchfield Partner Stephen Ravenscroft Partner Alexandra Whittaker Solicitor Vladka Thwaites Solicitor Martha Burnige Solicitor Sarah White Solicitor Jennifer Burton Paralegal Education: Richard Gold Partner Michael Brotherton Solicitor Jane Graham Solicitor Naseem Nabi Solicitor

Evolution of the Lantern The Stone King charity update has been called "the Lantern" since it was set up in Spring 1999. During that time its light has shone over many changes to charity law and practice as well as to the newsletter’s size and format. However it is felt that despite its good service, "the Lantern" should be extinguished and replaced by the "Spotlight", to focus an even brighter light into the future! So we are

and commonsense on the part of both

Alexandra Whittaker

organisations.

pleased to launch the newly named "Spotlight" and at the same time announce a fond farewell to "the Lantern”. The "Spotlight" will now be issued three times a year in the Spring, Autumn and Winter. (Any groans or comments on the analogy can be sent to the Ed, by means of our usual address Ed!)

Legacy Disputes: Nick Watson Partner Robert Meakin Partner Paul Sutton Associate Dispute Resolution: Nick Watson Partner Paul Sutton Associate Michael Brotherton Solicitor Commercial Property: Hugh Pearce Partner Stephanie Howarth Senior Associate Catherine Sanderson Associate Sally McFadden Associate Donna Del-Greco Solicitor Joanne Sturges Solicitor Kathrine Wardle Paralegal Sarah Lawson Paralegal

Corporate & Commercial: Roy Butler Partner Lynne Rigg Solicitor Caroline Leviss Solicitor Employment: Nick Watson Partner Peter Woodhouse Partner Naseem Nabi Solicitor Child Protection: Steven Greenwood Partner Housing: Geraldine Winkler Legal Executive Jess Anstey Solicitor Trust and Taxation: Andrew Mortimer Partner Alison Allen Partner Charles Hayward Partner

© Stone King LLP 2007

email: charity@stoneking.co.uk

The Spotlight deals with some current legal topics. It should not be used as an alternative to specific legal advice on the individual circumstances of a particular problem.

www.stoneking.co.uk

Stone King LLP - registered limited liability partnership no OC315280, registered office 13 Queen Square, Bath BA1 2HJ


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