spotlight_summer_07
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Contents INTEGRATED ASSETMANAGEMENT PLANNINGCould it Save You Money?
Working with the Not-for-Profit Sector Summer 2007
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.
Nearly half of all occupier property
forecasts are reported as being inaccurate
by more than 100% as occupiers often
massively over or under estimate how
much accommodation they require.
Clearly, too little will lead to significant
operating risk, and too much will result in
an organisation wasting money.
There is a growing appreciation of the link
between an organisation's accommodation
1–2 Integrated Asset Management
Planning
3 School Minibuses and Drivers
Hours Rules
3 Client Focus - Houseold Cavalry
4 Budget 2007
5-6 Registration in Scotland
6 Digest - Stone King News
and its operational performance, due to
the extent to which the environment
provided by property impacts upon its staff,
customers and wider third party image. So
in addition to having the wrong amount of
property, having the wrong type of property
will also have a significant negative impact
on any organisation's performance.
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
so rectifying a deficit or excess is usually a
costly and time consuming exercise.
There is the added complication that the
property market is highly imperfect and
does not typically provide the ideal type or
size of property, in the desired location.
This highly imperfect supply situation
coupled with the time, expense and
'business' disruption (e.g. the negative
impact relocation uncertainty has on staff
and customers, and the physical disruption
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
Spotlight
�
Integrated Asset Management PlanningCould it Save You Money? Continued
being a liability, and instead make it one of
their most positive assets.
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
opportunities in advance by the creation of
an asset management plan. Whilst this
may seem obvious its benefits should not
be underestimated. However its creation
will require the initial input and ongoing
involvement of senior management as it
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
support (e.g. expansion, contraction,
and/or organisational change or re-
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
characteristics. However, summarised
below are some of the main benefits
available to any organisation from the
development and implementation of an
integrated property asset management
plan.
� Identify immediate opportunities to
reduce property costs through the way
accommodation is procured.
� Identify any immediate risks (e.g.
maintenance and repair obligations)
presented by the current property base.
� Improve management information and
business reporting to fully illustrate the
financial extent of the property asset
base. This presents the opportunity to
demonstrate the value added to an
organisation from effective and efficient
asset management initiatives, and
enables fully informed property related
decisions to be made.
� As a tool it offers the senior
management team the opportunity to
develop medium and long term property
strategy frameworks.
� A thorough understanding of an
organisation's accommodation
requirements will highlight what
accommodation is necessary and
support the procurement of property
which provides an environment
consistent with the occupational
demands of its staff and customers.
Equally, the organisation may benefit
from an increased awareness of the
ongoing changes to the way workspace
may be configured and managed (eg.
remote working, hot desking,
accommodation configuration).
Charlie Foster, Grant Thornton UK LLP
“One solution is to identify risks and opportunities in
advance by the creation of an asset management plan”
�
School Minibuses and Drivers Hours RulesThe EU drivers hours rules changed on
11th April this year and the law regarding
when EU drivers hours rules must be
observed and tachograph equipment
fitted to various vehicles has been
clarified and amended. This has an effect
upon schools most notably in relation to
the use of minibuses. The law now is that
a minibus with up to 9 seats (including
that of the driver) will be out of scope for
drivers hours rules and will not require a
tachograph to be fitted.
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
The Household Cavalry’s current
museum is located in Combermere
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
the Life Guards, the Royal Horse
Guards or the Royal Dragoons.
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
because it was behind the wire of the
barracks. Therefore, a bold decision
was taken to re-establish it in one of
London’s most historic buildings,
Horse Guards, home to the Army since
1750. The project has cost nearly £5
million and comes to fruition this
summer with the official opening by
Her Majesty The Queen at a Pageant
on Horse Guards on 12th June and its
opening to the public on Monday 9th
July.
This hugely exciting project, bringing
as it does a new visitor attraction right
into the heart of ‘Royal’ London, now
faces the challenge of covering
outstanding loans of about £1 million
so that it can face the future financially
secure.
Advance tickets for the Museum can be
booked on 0207 7667330.
if they are used for the non-commercial
carriage of passengers in the UK.
Whether the carriage of passengers is
non-commercial is a moot point.
However an initial indication from the
Department of Transport has suggested
that teachers will be considered
volunteer drivers, and therefore driving
on a non-commercial basis, provided
they are not required to drive the vehicle
as part of their employment contract and
are not paid for doing so. Any journey
involving a vehicle of between 10 and 17
seats that includes travel to another EU
member state will however come within
the scope of the EU drivers hours
regulations and, therefore, that work will
need to be recorded on a tachograph.
Any vehicle, therefore, of that size will
need tachograph equipment to be
installed if it is to undertake work
outside the UK and in another EU
member state.
Andrew Banks
Client Focus
Household Cavalry Museum
1. Gift Aid
The headline of the budget – reducing
income tax from 22p to 20p in the pound
– has also proved to be a headline in
terms of the budget’s impact on
charities, but for more negative reasons.
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
£71m drop in reclaimable Gift Aid the
Treasury’s main concern remains the
estimated £700m of potential
reclaimable tax that charities are not
currently claiming.
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
may now receive benefits of up to 5% of
the value of the donation up to a cap of
£500. The thresholds for allowable value
of benefits for donations under £1000
remain at 25% of a donation for
donations up to £100 and £25 for
donations between £101 and £1000.
2. VAT – New Buildings
Deep in the small print of the budget is a
potentially significant change to the VAT
position for charities who are
constructing new buildings or who are
reconstructing or altering listed
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
would be used solely for a relevant
charitable purpose. Importantly, where
there was any change from this position
within ten years after the construction
work the zero-rating could be lost and
HMRC could claw back VAT that was
previously not due.
The change is that charities will no
longer become liable to VAT where there
is a change of use within ten years of the
zero-rating being obtained providing that
the change of use was not anticipated at
the time of obtaining the zero-rating.
Example
A new sports hall was built by a ‘sports
charity’ for its charitable purposes and
zero-rating was obtained on this basis. If
five years later the charity thought that
actually it would be sensible for 20% of
its use to be made available to the wider
community, for example allowing an
orchestra to practice and perform and
holding school examinations, then the
charity would now be free to do this
without worrying about having a new VAT
liability.
This is a welcome reform of the VAT
regime for charities and it is thought to
be particularly aimed at academies, as it
will allow charities to have greater
confidence in deciding to construct new
Budget 2007
buildings. For any charities that have
undertaken such a ‘change of use’ in the
last three years, they can now obtain a
refund for any VAT that became due
under the previous rules.
3. Community Organisation Fund
The Chancellor also announced a new
£80m fund to provide small grants to
community groups. The fund is an
attempt to help bolster the grass roots
of the third sector where, the
government acknowledges, small
community level groups undertake a
wealth of unique and effective work in
addressing local needs. The fund will be
split over four years and given out by
local grant makers who, it is hoped, will
be in the best position to know the local
market in terms of what will and what
will not be an effective use of the money.
Overall this has not been a landmark
budget for the charity sector. Welcome
changes to Gift Aid benefits for larger
donations, grant making opportunities
and VAT on buildings have been off-set
by a reduction in the amount of Gift Aid
charities can claim back. It seems
nothing has been given away as to the
role of the sector if the Chancellor
moves next door.
Matthew Waters
“Overall this has not been a landmark
budget for the charity sector”
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
documents. OSCR requested 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
charity in all its operations (not just in
Scotland). This is because any English
charitable purpose which is not also
recognised in Scotland would be
excluded (and vice versa). Whilst some
may consider the current differences
between the two jurisdictions as minor
(e.g. Advancement of the Armed Forces is
not a charitable purpose in Scotland),
both jurisdictions interpretation of
charitable purposes are set to evolve
separately, and wider differences may
start to appear. There is also a difference
in the Public Benefit test between both
jurisdictions, and Scotland has
introduced a concept of disbenefit which
is to be taken into account when
analysing whether activities are
charitable.
Implementing the suggested changes
would mean that the English charities
affected would need to have regular
Scottish advice in order to operate, with
the added costs this would entail.
Because of the significant nature of the
changes being requested many charities
and their advisers (including us)
complained, to OSCR and the Charity
Commission, that these changes were
unacceptable.
Current Status
The result of so many complaints has
been that OSCR and the Commission are
revisiting this issue and we await the
outcome of their deliberations. In the
meantime OSCR has agreed not to take
action against charities in this category if
they continue to operate in Scotland and,
where requested, they are placing such
applications on hold, subject to the
provision of any other information which
may have been requested.
Since the test for charitable tax relief
throughout England, Scotland and Wales
is based on the English legal
interpretation of charitable purposes,
failure to register in Scotland should not
affect general tax reliefs. However rate
relief is at the discretion of local councils,
and may be affected.
On the whole though English charities
can continue operating in Scotland for
the time being, provided they have
applied to register with OSCR.
Way forward
It is possible that a political solution can
be found, as the Scottish Ministers have
the power to exempt certain categories of
charity from requirements of the Scottish
“…the current legal definition of what constitutes a charitable
purpose in England and Wales is already different to that
under Scottish law…”
Registration in ScotlandA touch of cross-border disorder?
�
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
trusts in two by Scheme, creating two
trusts – one Scottish compliant and one
English compliant;
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
would trust to a degree of pragmatism
and commonsense on the part of both
regulators.
The outcome will undoubtedly show us
just how independent Scotland intends
to be over its charity law and what level
of understanding exists between the two
charity regulators.
Alexandra Whittaker
Stone King LLP
13 Queen Square Bath BA1 2HJTel. 01225 337599Fax. 01225 335437
28 Ely Place London EC1N 6TDTel. 020 7796 1007Fax. 020 7796 1017
Wellington House, East Road,Cambridge CB1 1BHTel. 01223 451070Fax. 01223 451100
The Spotlight deals with some current legal topics. It should not beused as an alternative to specific legal advice on the individualcircumstances of a particular problem.
© Stone King LLP 2007
email: [email protected]
www.stoneking.co.uk Stone King LLP - registered limited liability partnership no OC315280, registered office 13 Queen Square, Bath BA1 2HJ
Your ContactsCharity:Michael King PartnerRobert Meakin PartnerAnn Phillips PartnerJonathan Burchfield PartnerStephen Ravenscroft PartnerAlexandra Whittaker SolicitorVladka Thwaites SolicitorMartha Burnige SolicitorSarah White SolicitorJennifer Burton Paralegal
Education:Richard Gold PartnerMichael Brotherton SolicitorJane Graham SolicitorNaseem Nabi Solicitor
Legacy Disputes:Nick Watson PartnerRobert Meakin PartnerPaul Sutton Associate
Dispute Resolution:Nick Watson PartnerPaul Sutton AssociateMichael Brotherton Solicitor
Commercial Property:Hugh Pearce PartnerStephanie Howarth Senior AssociateCatherine Sanderson AssociateSally McFadden AssociateDonna Del-Greco SolicitorJoanne Sturges SolicitorKathrine Wardle ParalegalSarah Lawson Paralegal
Corporate & Commercial:Roy Butler PartnerLynne Rigg SolicitorCaroline Leviss SolicitorEmployment:Nick Watson PartnerPeter Woodhouse PartnerNaseem Nabi SolicitorChild Protection:Steven Greenwood PartnerHousing:Geraldine Winkler Legal ExecutiveJess Anstey SolicitorTrust and Taxation:Andrew Mortimer PartnerAlison Allen PartnerCharles Hayward Partner
New People
Sally McFadden joins our commercial
property team as an associate having
practised in Birmingham for the past
9 years at Wragge & Co, Anthony
Collins and Martineau Johnson.
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.
CICs
Stone King LLP has just set up a new
community interest company named
The Bridge Rehabilitation Community
Interest Company which will offer
residential addiction rehabilitation
services. Community Interest
Companies are a new form of
company designed for social
enterprise and other not for profit
organisations.
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
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!)
Digest – Stone King News
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