F&GP Meeting November 2017

WR I GLEY S ---- S OL I C I TOR S ----

13 October 2017

 Trading subsidiaries are not entitled to Business Rates Relief, so if the nursery is working on tight margins running the nursery through a non-charity may have an adverse effect on its financial viability.  Any lease from GFTUET to Quorn Grange Day Nursery Ltd will not fall within the charity to charity exemption, and there will be an expectation that the lease is on the best terms that can reasonably be obtained for the charity, or a Charity Commission order will be required. The full Charities Act provisions are a bit more detailed than this, and vary depending on the length of the lease. We can advise further on the detail of the Charities Act requirements, if required.

 There may also be SDLT implications in granting a lease to a non-charity, depending on the length of the term of the lease.

 Conflicts of interest between GFTUET and Quorn Grange Day Nursery Ltd will need to be managed if there is any overlap of personnel on the boards.

We suggest that the trustees of GFTUET ask their accountants to advise them on the level of tax which is likely to be payable, as this may help to inform their decision-making.

A separate charity?

Alternatively, the trustees of GFTUET could set up a separate charity to run the nursery – either a charitable company or a CIO.

The advantages of this are that the nursery could benefit from charity tax reliefs and Gift Aid on eligible donations. As the law currently stands, the proposed lease could be brought within the charity to charity transfer provisions, which would mean that the transfer could be at "otherwise than for the best price that can reasonably be obtained" (if that is what is wanted) without the need for Charity Commission consent (assuming that any conflicts of interest can be managed). It would, however, mean finding a separate board of trustees, all of whom would need to comply with charity law, including the need to act independently. The trustees of the nursery charity would need to act in the best interests of the nursery charity, which may not always be the same as the best interests of GFTUET. I would not expect the nursery to be gifting any profits back to GFTUET if it were a charity. As I mentioned when we met, there are some significant changes to charity law in the pipeline, including in relation to charity property. This may mean that the procedures are slightly different when GFTUET actually come to enter the proposed arrangements. This is not something which needs to affect the decision they come to on their preferred option, but it may mean that the position is slightly different from that set out above.

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