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

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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

charlie.foster@gtuk.com

“One solution is to identify risks and opportunities in

advance by the creation of an asset management plan”

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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: charity@stoneking.co.uk

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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