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To view SocialEconomy online visit: www.unity.co.uk/socialeconomynewsletter or www.wrigleys.co.uk

SocialEconomy A quarterly bulletin of information for charities, voluntary organisations and social enterprises

Charities

Issue no. 94 December 2008 - February 2009

New trigger for compulsory registration of land Although the first office of the Land Registry was opened in London on 15 October 1862, it is only in the last 35 years or so that substantial progress has been made in extending registration to all areas of England and Wales with the Government’s expressed intention to achieve “total registration” by 2012 if possible. Registration of land has been compulsory following most transfers or the grant of a mortgage, but because property held on charitable trusts may be dealt with infrequently it can be left behind in the process of compulsory registration. From 6 April 2009, the appointment of a new trustee will trigger compulsory first registration of unregistered land if the land vests in the new trustee by deed or by a vesting order made by the court. If managing trusts of land, you should be aware of the initial increased legal and registration costs

which will be unavoidable if the appointment is to be effective. After first registration, subsequent dealings with the land should be quicker and incur fewer costs than if the land had remained unregistered.

registration is 25% cheaper than for compulsory first registration.) In the short term, you could seek to complete deeds of appointment on or before 5 April 2009, but this will only postpone the fateful day.

For assistance and further information, please contact Valerie James or Elizabeth Wilson at Wrigleys Solicitors LLP.

Future changes of trustees will, however, be more expensive, incurring on each occasion a Land Registry fee based on the value of the land. If the property is held by individual charity trustees rather than by an incorporated body, you may consider vesting the property in the Official Custodian for Charities on registration so as to avoid these fees or appoint a corporate trustee through a Commission Scheme. Registration is required within two months of the appointment and this may be a challenge to achieve if the land holding is complex. In such cases, it may be worth considering voluntary registration now to allow more time for the process. (The Land Registry fee for voluntary first

OSCR finishes first public benefit assessments

OSCR, the Office of the Scottish Charity Regulator, has published the results of its initial public benefit reviews. A number of charities have failed the public benefit test. These charities are being given three months to confirm whether or not they accept OSCR’s findings. If they accept the findings then they are given a further six months to come up with a plan to remedy the scale of public benefit. They are then given a further two years to increase the scale of public benefit.

Of the charities which failed, four are schools. If the charities advise that they accept the findings but will take no action OSCR has suggested it will remove the charity from the Register, withdrawing charitable status. Interestingly, there is no suggestion that it will appoint new trustees to bring about public benefit. For further information, see Rolling Review decisions in Latest news a t : h t t p : / / w w w. o s c r. o r g . u k /CurrentNews.aspx

SocialEconomy is published by Wrigleys Solicitors in association with Unity Trust Bank


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Can Jobseekers volunteer full-time?

A difficult area for charities using volunteers is the extent to which volunteers may lose benefits by volunteering. A new Job Centre Plus brochure on volunteering while receiving benefits starts off well but in the end provides an ambiguous answer to this question. On page five of the guide it states that “You can be a volunteer and, in nearly all cases, your benefits will not be affected”. On page 14 it states that “You can still be a volunteer and get Jobseeker’s Allowance as long as you: follow the basic rules; are still actively looking for a full-time paid job; are available for work or treated as being available for work; are still able to go for an interview at 48 hours’ notice; are still able to start a job at one week’s notice; and let Jobcentre Plus know before you start, and tell them about any expenses you may get”. Unfortunately, the second half of the booklet deteriorates. The

Frequently Asked Questions on page 18 contradict this initial position. To the question “Can I do full-time volunteering if I’m getting Jobseeker ’s Allowance?” The answer given is “If you do full-time volunteering, you cannot normally get Jobseeker’s Allowance. This is because you may not be able to meet the conditions for claiming Jobseeker’s Allowance such as being available for and actively seeking work. If you want to receive a full-time volunteering allowance, you will have to stop claiming Jobseeker’s Allowance”.

the Department for Work and Pensions (DWP) publication “A guide to volunteering while on benefits” which can be found at: www.jobcentreplus.gov.uk/jcp /stellent/groups/jcp/documents /websitecontent/dev_015837.pdf

The key point seems to be that if you employ volunteers who are claiming benefits, you should encourage them to speak to Jobcentre Plus before they start voluntar y work for you. Any payments or benefits in kind they receive as a result of volunteering may affect their benefits. Further information can be found in

Giving to charities in Europe For some time now, commentators have been suggesting that our tax rules, which only allow tax breaks to charities based in the UK (or to donors giving to such charities), may be in breach of EU laws relating to the free movement of capital. This may soon be confirmed in the case of Hein Persche v Finanzamt Lüdenscheid, which is being heard in the European Court of Justice (ECJ). The opinion of Advocate-General Mengozzi, which was published on 14 October 2008, concluded that donations by individuals resident in one member state, to organisations based in another member state (and recognised as charitable in that member state) constitutes ‘movement of capital’ and therefore falls within the application of the EU Treaty. It is contrary to articles 56 and 58 of the Treaty not to allow an individual taxpayer to prove that an organisation based in, and recognised as charitable in, another member state would fulfil the requirements which apply in that taxpayer’s own member state as to whether the organisation is a

charity for the purposes of that member state. The burden of proof is on the taxpayer to show that it is. The next stage is for the ECJ to make a decision. In the Stauffer case, which was decided in September 2006, the ECJ held that a Portuguese charity which fell under the German definition of charitable, should be able to reclaim corporation tax in Germany for a disposal there, despite the local restriction that only charities based in Germany could claim the exemption. Given that precedent, it would be surprising for the Court to deviate from the opinion of the Advocate-General. These rulings could have wide repercussions on the UK’s tax treatment for charities in other EU countries, as well as on donations by UK residents to such charities. Not surprisingly, in both cases, there were strong representations from the UK Government against the application of the Treaty - but the Government’s track record on interpreting EU law correctly is not strong!


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Charitable Incorporated Organisations - CIOs Draft regulations and model documents for the CIO (or Charitable Incorporated Organisation) were published by the Charity Commission and the Office of the Third Sector in September, for a consultation which closed on 10 December. This is the long-awaited proposed new form of charity which has limited liability but for which there is only one registrar, the Charity Commission. It will be particularly useful for small charities registered as unincorporated associations who will be able to shelter their trustees and members from

unlimited liability by adopting this structure. It may also be useful for unincorporated charitable trusts provided they have no permanent endowment. It is anticipated that the model documents will be amended and subject to a further consultation. It is hoped that CIOs will become available at some point between October 2009 and early 2010, if the timetable does not slip again. See: http://www.cabinetoffice.gov.uk/ third_sector/Consultations/current _consultations/cio.aspx

Substantial donors - HMRC consultation We have considered the antiavoidance tax rules known as the ‘substantial donor rules’ in previous editions. In July this year, HMRC issued a consultation on these complicated and unpopular rules, to receive comment on the following proposed changes: (1) New thresholds for identifying a substantial donor. Instead of a person being a substantial donor if they have made a donation of £25,000 in one y e a r, t h a t l i m i t r i s e s t o £50, 0 0 0 . I n s t e a d o f £100,000 over six years, the

amount would be £125,000 over three years.

not simply made because that person is a donor).

• benefits to donors of under £500 will be ignored.

(2) They are proposing to add new excepted transactions (which would no longer be caught by the rules), so that:

(3) HMRC are also proposing to introduce two new de minimis limits:

The consultation closed on 7 October 2008. Assuming that HMRC proceed as they have suggested, we may see the changes in the Finance Act 2009. Given the wide-spread criticism which we know has been voiced in relation to the legislation generally (the tax charge and administrative burden still fall on the charity), it may be that they have a more fundamental rethink. See: http://customs.hmrc.gov.uk/

• employees of a charity can be paid even if they are substantial donors; and • charitable grants can be made to substantial donors, provided they are at arm’s length and are made under the same conditions as to other beneficiaries (and are

• if a gift is under £1,000, this should be ignored for the purposed of determining whether someone is a substantial donor. However, it can be taken into account again when considering whether in a whole year (or in three years), a person has made enough gifts to qualify as a substantial donor; and

Charity Commission begins first public benefit assessments As promised, the Charity Commission began its public benefit assessments in October. The first targets are independent schools, religious charities and fee-charging residential homes. The review will involve information gathering, analysis, then a report by the Commission, which will be published. The Charity Commission can also instigate a formal inquiry if it deems it appropriate. The possible outcomes are a decision that: the organisation is

not capable of being a charity (so it will be removed from register or restructured); it is capable of being a charity, but is not operating for public benefit (the Commission will suggest changes and can issue directions or replace trustees); and it is capable of being a charity and is operating for the public benefit (so no changes are required). Decisions can be challenged by the charities in question. The Commission has created an information sheet on the process, which provides further details about

this work, and what it means for charities. The f irst cha rit ie s t o be reviewed are featured on the Charity Commission’s website. See: h t t p : / / w w w. c h a r i t y commission.gov.uk/ publicbenefit/default .asp#infosheet for further information.


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Employment...

Not all is equal with the Equality Regulations In a well reported case the Tribunals have sought to reaffirm that where there is a direct conflict between the protection afforded under the Equality Rules relating to religion or belief and those afforded to sexual orientation, one set of rights do not override the other. The employer was a registrar of births, deaths and marriages. She refused to conduct civil partnership ceremonies as enabling same sex unions was contrary to her religious beliefs. For many years a work-around situation had existed with the employee swapping duties to avoid conflict. The employer received a complaint from some other staff that such conduct was contrary to the employer’s dignity policy, was contrary to the Sexual Orientation Regulations and was discriminatory. The employee complained of poor treatment, a lack of support from colleagues and ultimately presented a complaint to the Tribunal on direct and indirect discrimination and harassment contrary to the Religion or Belief Regulations. The Tribunal recognised the employer’s objective of complying with its duties under the Sexual Orientation Regulations but held that the employer had failed to take into account the employee’s rights under the Religion or Belief Regulations. A number of examples of direct discrimination were identified by the Tribunal, including a breach of confidentiality by sharing details of the proposed disciplinary action with those colleagues who had complained about the employee’s conduct without anything in place to prevent those colleagues from further disclosing that information and had failed to uphold its dignity policy in respect of the behaviour of colleagues towards the employee. The Tribunal further recognised that the employer had a legitimate aim in promoting the rights of the LGBT community and that it also had a statutory duty to provide the service in question. However, this did not justify the employer’s action towards the

employee. In simple terms the employer could have accommodated the employee’s objections but had chosen not to do so. (Ladele -vLondon Borough of Islington.) Harassing the Employer The Employment Appeal Tribunal (EAT) has held that dismissing an employee for making false and bad faith claims of race discrimination did not amount to victimisation. Over a number of years the employee made a number of separate claims against his employer most of which failed except for one victimisation claim. The employee had pursued appeals and had a number of costs orders made against him for pursuing claims with no reasonable prospects of success. The employer dismissed the employee on the grounds that the employee had been pursuing discrimination claims in order to harass the employer into making a settlement. This had created a great deal of stress and

anxiety and involved significant cost and ultimately led to a breakdown in trust and confidence. The Tribunal initially took the view that at least one allegation was genuine and had been upheld and therefore all of the complaints were protected under the victimisation rules. Dismissing the employee as a result of those complaints was therefore victimisation and accordingly unfair. The EAT overturned this saying that the reason for the disciplinary action was not the complaints themselves but that the complaints had been made with a view to harass. Such action, harassment, was not protected and the employer was entitled to take action. Such cases are very much limited to their facts but reflect the position under the whistle blowing legislation where any whistle blowing must be in good faith and not tainted by any personal motive. For employers the key remains in clearly identifying the grounds on which any disciplinary action is taken. (HM Prison Service -v- Ibimidun.)

Ta k i n g s t a t u t o r y h o l i d a y during notice The general position under the Working Time Regulations (WTR) is that an employer has to give twice as much notice of required holiday than the period to be taken, i.e. if four days are to be taken then the employer must give eight days notice. In this case the employment contract required holiday to be taken during any notice period. The Tribunal held the employer hadn’t given the correct notice and the employee was accordingly entitled to an additional payment for accrued but untaken holiday on termination of his employment. This was overturned by the EAT which held that there was a legally enforceable contractual term between the parties which required holiday to be taken during the notice period and this was a ‘relevant agreement’ for the purposes of WTR. This is a standard provision which all employers should have in their terms. Otherwise where you look to pay in lieu of notice you will need to add in the extra for holidays. (Industry & Commerce Maintenance -v- Briffa.)


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Local Government‌ Promoting Well-Being Unitary, county and district councils were given a wide ranging power to promote the well-being of their communities by the Local Government Act 2000. This was extended to eligible parish councils by the Local Government and Public Involvement in Health Act 2007. It is further proposed to extend the power to passenger transport authorities. The Department of Communities and Local Government (DCLG) has

reviewed the application of those powers and produced a publication informing local authorities on how it has been used. Charities and social enterprises would do well to understand how local authorities can use these powers to support activities undertaken with the support of local authorities. The well-being power permits local authorities to incur expenditure, give financial assistance, enter into partnerships and set up companies,

p r o v i d e s t a f f, g o o d s a n d accommodation and exercise functions on behalf of other bodies such as the local NHS Trust. It is a wide ranging power. Unfortunately, it appears that local authority lawyers are the gatekeepers to the use of the power and their advice on the power may be a determining factor in whether local authorities are actively using it or not. The DCLG report illustrates when the power can be used: to acquire

derelict property rather than using compulsory purchase powers; to establish a private public regeneration partnership. To set up a non-profit company for promoting woodheat technology for schools; and to establish a partnership arrangement with a Primary Care Tr u s t o n s o c i a l s e r v i c e s . For fur ther information, see: www.communities.gov.uk Practical Use of the Well-Being Power.

Promoting Sustainable Communities The Sustainable Communities Act 2007 also builds on the power of well-being. Sponsored by a coalition of charities and community organisations under the banner Local Works, the Act provides a mechanism for local communities to inform central Government about what needs to be done to promote the sustainability of a particular local community. The Act also permits local authorities to ask central Government to take action to improve well-being too. It is the intention of the Act that communities work through their local authorities to put forward proposals to central Government each year. These proposals are then sifted and action is taken by central Government to

Social Enterprise‌ Urgent Health UK A consortium of five large social enterprise providers of out-of-hours care has created Urgent Health UK. The consortium, which is structured as a company limited by guarantee is the largest social enterprise of its kind in the country, and will contract to provide out of hours care contracts, often directly with the NHS. The consortium is

supported by a ÂŁ550,000 investment from the third sector financer Futurebuilders. The partner organisations are Devon Doctors, SELDOC (Lewisham, Lambeth and Southwark), Urgent Care 24 (North Merseyside), Herts Urgent Care Ltd (Hertfordshire) and South East Health (Kent). (New Sector Oct-Nov 08.)

implement what are regarded as the most effective proposals. A second limb to the Act is that the Government should make arrangements for the production of local spending reports. The purpose of the reports is for community regeneration organisations to gain an understanding of the quantity and sources of public funding which is spent within a local authority area or part of it. The intention is that community organisations may use the information in those reports to re-order spending priorities of the public sector. The mechanisms to lead to the creation of these reports is due to be available by April 2009. Fo r f u r t h e r i n f o r m a t i o n s e e Sustainable Communities Act 2007: A Guide www.communities.gov.uk


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Community Investment Co-operatives UK and Jim Brown have produced a new book entitled “Community Investment – Using Industrial and Provident Society – Legislation”. The document examines

the existing Industrial and Provident Society (IPS) legislation, discusses numerous examples and gives guidance to any social enterprise looking to utilise the IPS model.

IPSs are increasingly used for community investment projects, with at least 60 instances to date, over half of those being in the last five years. The book explains some of the reasons for this, highlighting the unique attributes of the relevant legislation and explaining how these attributes make the vehicle so suitable for community investment. The ability to raise funds is key. Although registered with the FSA, in many cases legislation does not prevent the issue by IPSs of shares to the public, giving the opportunity to cast the net wide when looking for investment. The structure can enable projects to raise significant sums of money, and engage individuals and businesses in social investment, as can be seen from the examples cited in the publication. HM Treasury are in the process of reforming IPS legislation. The

consultative review of IPS legislation launched by HM Treasury in June 2007 led to proposals for legislative reform, released in July this year. The proposals include doing away with the maximum holding of transferable shares in an IPS currently imposed on individuals, but leaving the current £20,000 maximum holding of withdrawable shares in place. The consultation on those proposals closed in October – we will report on the outcome in due course. Copies of the book can be ordered from Co-operatives UK. www.cooperatives-uk.coop Contributions in this edition of Social Economy from Chris Billington, Sue Greaves, Valerie J a m e s , N a t a l i e J o h n s o n, Malcolm Lynch and Sylvie Nunn at Wrigleys Solicitors LLP.

Renewable Energy…

Farming renewable energy Maitland Mackie, the chairman of Mackie’s ice cream company, is expanding his involvement with renewable energy. Mackie has some experience in the sector as Mackie’s currently operates three wind turbines which supply all the electricity for its farm and ice cream shop with the surplus being sold to the National Grid. The new venture is Rural Sector WinGen Ltd (RSWL). Mackie is looking for some 10,000 farmers and landowners to invest £1,000 for a share in RSWL and give the company an option on suitable sites for wind turbines. The aim is ambitious. Mackie hopes that within 12 years RSWL

will be able to deliver 90 Giga Watts into the National Grid from sites owned by farmers and landowners across the UK. To put this in perspective, the UK’s current generating capacity is 85 Giga Watts.

Whilst the plans are exceedingly ambitious, given the difficulties encountered in obtaining planning permission for wind farms, there is a logic in sharing the risks of development among farmers and landowners.

What Mackie is seeking to do is establish a farmer/landowner wind farm developer to receive more of the benefits from wind farm development, the development costs of which are often beyond the scope of most farmers/landowners. Instead of farmers/landowners receiving only a rent for the land on which the turbines stand they could share in the increased returns from a development.

Baywind Energy Co-operative, which Wrigleys advised on its establishment, has demonstrated that communities can develop the expertise to build locally acceptable wind farms. Rural Sector WinGen Limited may be able to replicate this success. For more information, visit the website www.wingen.co.uk or contact Maitland Mackie at maitland@wingen.co.uk

Could we help with your banking needs? Contact Unity Trust Bank, Nine Brindleyplace, Birmingham, B1 2HB, tel: 0845 140 1000 or visit www.unity.co.uk If you require legal advice on charity and social economy law Please contact Malcolm Lynch at Wrigleys Solicitors, 19 Cookridge Street, Leeds, LS2 3AG, tel: 0113 204 5724, or visit www.wrigleys.co.uk

Unity Trust Bank - Social Economy Newsletter - Issue 94  

A quarterly bulletin of information for charities, voluntary organisations and social enterprises. This issue covers December 2008 - Februar...

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