When is a charity not a charity?

[magnetman]

Maybe the CRT should open some charity shops and seek donations . 

[Mike Todd]

1 hour ago, Allan(nb Albert) said:

If we take the Univesities as an example,  they are exempt charities under the Charities Act. They may not register with the independent Charity Commission and are not subject to its control.

 

CRT, as a company limited by guarentee, registered with the Charity Commission in 2012. 

 

 

Charities should be inependent of government and the ONS decission may well result in CRT's charitable status being removed. 

 

To avoid this, it would appear that Defra are attempting to remove its control over CRT.

 

Companies Limited by Guarantee do not have to register with CC, only if they wish to take advantage of the status that comes with it.

 

Perhaps the largest group of organisations that are exempt charities are Church of England parishes which only have to register with CC if their turnover exceeds a given limit.

[Ray T]

5 minutes ago, magnetman said:

Maybe the CRT should open some charity shops and seek donations . 

 

The Mrs. worked in a PDSA shop for a while as a volunteer, it was stressed to her it was a "Retail outlet supporting a charity," not a "charity shop."

It was run on retail norms and had to make a profit. I went bust during Covid and closed.

[magnetman]

1 minute ago, Ray T said:

 

The Mrs. worked in a PDSA shop for a while as a volunteer, it was stressed to her it was a "Retail outlet supporting a charity," not a "charity shop."

It was run on retail norms and had to make a profit. I went bust during Covid and closed.

 

I think the goalposts moved at some stage. There was a time, as I understand it, that local councils would give special deals for charities to rent retail units they owned. 

 

Don't know if it is true its just something someone told me and made sense. 

[Scholar Gypsy]

24 minutes ago, Mike Todd said:

Companies Limited by Guarantee do not have to register with CC, only if they wish to take advantage of the status that comes with it.

 

Perhaps the largest group of organisations that are exempt charities are Church of England parishes which only have to register with CC if their turnover exceeds a given limit.

Just to confuse the picture even more, small parishes (below £100,000) are excepted charities, which is not quite the same as exempt charities (the latter includes Academy Trusts and a number of other parts of the public sector), where the CC has a more limited regulatory role. https://www.gov.uk/government/publications/exempt-charities-cc23

 

There are very good reasons for Defra and CRT to want to get CRT moved back to their previous  private sector classification. Being a public sector body can lead to a number of restrictions on (eg) banking arrangements, borrowing powers, ability to use assets as security etc etc, as set out in an exciting document called Managing Public Money.   

Either the CC accept the objects of CRT as being charitable, or they don't, and that is not affected by what the ONS say. The formal (eg fiduciary) duties of the Trustees are not affected.

[Allan(nb Albert)]

39 minutes ago, Scholar Gypsy said:

 

 

There are very good reasons for Defra and CRT to want to get CRT moved back to their previous  private sector classification ...
 

CRT was never classified as being in the private sector so can't be moved back.

 

It has been classified by ONS as being a public non-financial corporation since 2012.

 

The classification only appeared to become an issue that needed resolution around the time that Defra was meant to make its announcement on future funding.

[Ronaldo47]

My understanding is that it used to be, and possibly still is,  advantageous for property owners to let charities occupy empty shops without having to pay rent. That way, the property was being taken care of, the market rent they were not receiving could be categorised as a loss for tax purposes, and the vaue of the premises  could be counted as an asset capable of generating the market rent they were not receiving on their balance sheet. If they had charged a reduced rent, they would have had to pay tax on the actual rental income, and the asset valuation of the property on their balance sheet would be reduced to reflect the reduced rental  income.  So it could be worth more as a tax loss to offset other income, than to let it out cheaply. I remember reading that the Centre Point office block in London was intentionally left empty for many years because it was more valuable as a tax loss than as a generator of rental income under the tax laws of the time.

Edited March 2, 2023 by Ronaldo47
typos

[MtB]

4 hours ago, Allan(nb Albert) said:

It has been classified by ONS as being a public non-financial corporation since 2012.

 

Off at a tangent, what is this ONS that keeps getting mentioned? Googling just gives me Office of National Statistics and I don't see them having the powers to classify the status of companies such as CRT. Or maybe they have! 

[Allan(nb Albert)]

18 minutes ago, MtB said:

 

Off at a tangent, what is this ONS that keeps getting mentioned? Googling just gives me Office of National Statistics and I don't see them having the powers to classify the status of companies such as CRT. Or maybe they have! 

Yes ONS is the Office of National Statistics and it does have the power to classify companies such as CRT. 

The latest classification guide published 28/2/2023 is at -

https://www.google.co.uk/url?sa=t&source=web&rct=j&url=https://www.ons.gov.uk/methodology/classificationsandstandards/economicstatisticsclassifications/introductiontoeconomicstatisticsclassifications&ved=2ahUKEwiEo8KYvb79AhVqhv0HHaFsA8YQFnoECAgQAQ&usg=AOvVaw0E4M5Y2wIXaoE05HRsfBgQ

[Scholar Gypsy]

12 hours ago, Allan(nb Albert) said:

CRT was never classified as being in the private sector so can't be moved back.

 

It has been classified by ONS as being a public non-financial corporation since 2012.

 

The classification only appeared to become an issue that needed resolution around the time that Defra was meant to make its announcement on future funding.

Thanks - sorry for getting myself confused. Given there's nothing new here, I find your last sentence hard to believe.  There may be governance issues that Defra want to sort anyway? It is also possible that HMT are trying to promulgate more of the rules/guidance in Managing Public Money, but that is just speculation on my part.

[Midnight]

I think this just about sums up where we are 
https://www.narrowboatworld.com/14413-what-is-a-charity
"...a decade of neglect has left boaters with a canal system that is arguably not fit for purpose"

[Jim Riley]

11 hours ago, Ronaldo47 said:

My understanding is that it used to be, and possibly still is,  advantageous for property owners to let charities occupy empty shops without having to pay rent. That way, the property was being taken care of, the market rent they were not receiving could be categorised as a loss for tax purposes, and the vaue of the premises  could be counted as an asset capable of generating the market rent they were not receiving on their balance sheet. If they had charged a reduced rent, they would have had to pay tax on the actual rental income, and the asset valuation of the property on their balance sheet would be reduced to reflect the reduced rental  income.  So it could be worth more as a tax loss to offset other income, than to let it out cheaply. I remember reading that the Centre Point office block in London was intentionally left empty for many years because it was more valuable as a tax loss than as a generator of rental income under the tax laws of the time.

There is also the question of Business Rates, a charity can get rate relief, the landlord would have to pay it on an empty shop. 

[Allan(nb Albert)]

18 minutes ago, Scholar Gypsy said:

Thanks - sorry for getting myself confused. Given there's nothing new here, I find your last sentence hard to believe.  There may be governance issues that Defra want to sort anyway? It is also possible that HMT are trying to promulgate more of the rules/guidance in Managing Public Money, but that is just speculation on my part.

The Defra announcement on future funding was to have taken place on or before 1 July 2022.

The first reference to the ONS classification was made in a Defra/CRT meeting on 1 August 2022 -

 

Quote

7. ONS Public Sector Classification (verbal)
Not covered as an agenda item, because there had been recent separate discussions between C&RT and Defra on the issue.

I can find nothing earlier. 

 

CRT did take out a £150 million loan secured against assets in 2018.

[Alan de Enfield]

14 hours ago, Scholar Gypsy said:

There are very good reasons for Defra and CRT to want to get CRT moved back to their previous  private sector classification. Being a public sector body can lead to a number of restrictions on (eg) banking arrangements, borrowing powers, ability to use assets as security etc etc, as set out in an exciting document called Managing Public Money. 

 

C&RT seem to have all the 'powers' they need to borrow money , lend money, buy / sell assetts, buy / sell / set-up any company etc etc :

 

 

3. Powers To further its objects the Trust may:

 

3.1 accept a transfer of any of the property, assets, undertaking, functions, responsibilities of any navigation authority, harbour authority or conservancy authority; and of any other person undertaking similar activities or functions or activities or functions that can conveniently be combined with such activities and functions;

 

3.2 act as trustee of any trust comprising real or personal estate and which, in the opinion of the Trust is calculated to further the aims and objects of the Trust and as such trustee carry out such trusts on the terms and conditions imposed in the instrument creating the same;

 

3.3 make reasonable charges for the use of the Inland Waterways it holds in trust, owns, operates or manages (including use by any ship or boat), and for the use of any services and facilities (including land set aside for specific purposes);

 

3.4 do any of the things that the British Waterways Board had power to do at the date of incorporation of the Trust (12 October 2011) that are conducive or incidental to the attainment or furtherance of the objects and carry on any trade provided that in doing so the Trust must not undertake any trading activity save in so far as either the trade is exercised in the course of the actual carrying out of an object or is ancillary to the carrying out of the objects or which is not expected to give rise to taxable profits;

 

3.5 provide and assist in the provision of money, materials or other help;

 

3.6 organise and assist in the provision of conferences, courses of instruction, exhibitions, lectures and other educational activities;

 

3.7 publish and distribute books, pamphlets, reports, leaflets, journals, films, tapes and instructional matter on any medium;

 

3.8 promote, encourage, carry out or commission research, surveys, studies or other work, making the useful results available;

 

3.9 provide or procure the provision of guidance; 

 

3.10 alone or with other organisations seek to influence public opinion and make representations to and seek to influence governmental and other bodies and institutions regarding the reform, development and implementation of appropriate policies, legislation and regulations provided that all such activities shall be confined to those which an English and Welsh charity may properly undertake;

 

3.11 enter into contracts to provide services to or on behalf of other bodies;

 

3.12 acquire or rent any property of any kind and any rights or privileges in and over property and construct, maintain, alter and equip any buildings or facilities;

 

3.13 dispose of or deal with all or any of its property with or without payment and subject to such conditions as the Trustees think fit (in exercising this power the Trust must comply as appropriate with the Charities Act 2011);

 

3.14 borrow or raise and secure the payment of money for any purpose including for the purposes of investment or of raising funds, including charging property as security for the repayment of money borrowed or as security for a grant or the discharge of an obligation (the Trust must comply as appropriate with the Charities Act 2011 if it wishes to mortgage land);

 

3.15 set aside funds for special purposes or as reserves against future expenditure but only in accordance with a written policy about reserves;

 

3.16 invest the Trust’s money not immediately required for its objects in or upon any investments, securities, or property;

 

3.17 arrange for investments or other property of the Trust to be held in the name of a nominee or nominees and pay any reasonable fee required;

 

3.18 lend money and give credit to, take security for such loans or credit and guarantee or give security for the performance of contracts by any person or company;

 

3.19 open and operate bank accounts and other facilities for banking and draw, accept, endorse, issue or execute promissory notes, bills of exchange, cheques and other instruments;

 

3.20 accept (or disclaim) gifts of money and any other property;

 

3.21 raise funds by way of subscription, donation or otherwise;

 

3.22 incorporate and acquire subsidiary companies to carry on any trade;

 

3.23 subject to Article 4 (application of income and property):

3.23.1 engage and pay employees, consultants and professional or other advisers; and

3.23.2 make reasonable provision for the payment of pensions and other retirement benefits to or on behalf of employees and their spouses and dependants;  3.24 establish and support or aid in the establishment and support of any other organisations and subscribe, lend or guarantee money or property for charitable purposes;

 

3.25 become a member, associate or affiliate of or act as trustee or appoint trustees of any other organisation (including without limitation any charitable trust of permanent endowment property held for any of the charitable purposes included in the Trust’s objects);

 

3.26 undertake and execute charitable trusts;

 

3.27 amalgamate or merge with or acquire or undertake all or any of the property, liabilities and engagements of any body;

 

3.28 co-operate with charities, voluntary bodies, statutory authorities and other bodies and exchange information and advice with them;

 

3.29 pay out of the funds of the Trust the costs of forming and registering the Trust;

 

3.30 insure the property of the Trust against any foreseeable risk and take out other insurance policies as are considered necessary by the Trustees to protect the Trust;

 

3.31 provide indemnity insurance for the Trustees or any other officer of the Trust in accordance with, and subject to the conditions in, Section 189 of the Charities Act 2011 (provided that in the case of an officer who is not a Trustee, the second and third references to “charity trustees” in Section 189(1) shall be treated as references to officers of the Trust); and

 

3.32 do all such other lawful things as may further the Trust’s objects

[Allan(nb Albert)]

49 minutes ago, Alan de Enfield said:

 

C&RT seem to have all the 'powers' they need to borrow money , lend money, buy / sell assetts, buy / sell / set-up any company etc etc :

 

 

3. Powers To further its objects the Trust may:

 

3.1 accept a transfer of any of the property, assets, undertaking, functions, responsibilities of any navigation authority, harbour authority or conservancy authority; and of any other person undertaking similar activities or functions or activities or functions that can conveniently be combined with such activities and functions;

 

3.2 act as trustee of any trust comprising real or personal estate and which, in the opinion of the Trust is calculated to further the aims and objects of the Trust and as such trustee carry out such trusts on the terms and conditions imposed in the instrument creating the same;

 

3.3 make reasonable charges for the use of the Inland Waterways it holds in trust, owns, operates or manages (including use by any ship or boat), and for the use of any services and facilities (including land set aside for specific purposes);

 

3.4 do any of the things that the British Waterways Board had power to do at the date of incorporation of the Trust (12 October 2011) that are conducive or incidental to the attainment or furtherance of the objects and carry on any trade provided that in doing so the Trust must not undertake any trading activity save in so far as either the trade is exercised in the course of the actual carrying out of an object or is ancillary to the carrying out of the objects or which is not expected to give rise to taxable profits;

 

3.5 provide and assist in the provision of money, materials or other help;

 

3.6 organise and assist in the provision of conferences, courses of instruction, exhibitions, lectures and other educational activities;

 

3.7 publish and distribute books, pamphlets, reports, leaflets, journals, films, tapes and instructional matter on any medium;

 

3.8 promote, encourage, carry out or commission research, surveys, studies or other work, making the useful results available;

 

3.9 provide or procure the provision of guidance; 

 

3.10 alone or with other organisations seek to influence public opinion and make representations to and seek to influence governmental and other bodies and institutions regarding the reform, development and implementation of appropriate policies, legislation and regulations provided that all such activities shall be confined to those which an English and Welsh charity may properly undertake;

 

3.11 enter into contracts to provide services to or on behalf of other bodies;

 

3.12 acquire or rent any property of any kind and any rights or privileges in and over property and construct, maintain, alter and equip any buildings or facilities;

 

3.13 dispose of or deal with all or any of its property with or without payment and subject to such conditions as the Trustees think fit (in exercising this power the Trust must comply as appropriate with the Charities Act 2011);

 

3.14 borrow or raise and secure the payment of money for any purpose including for the purposes of investment or of raising funds, including charging property as security for the repayment of money borrowed or as security for a grant or the discharge of an obligation (the Trust must comply as appropriate with the Charities Act 2011 if it wishes to mortgage land);

 

3.15 set aside funds for special purposes or as reserves against future expenditure but only in accordance with a written policy about reserves;

 

3.16 invest the Trust’s money not immediately required for its objects in or upon any investments, securities, or property;

 

3.17 arrange for investments or other property of the Trust to be held in the name of a nominee or nominees and pay any reasonable fee required;

 

3.18 lend money and give credit to, take security for such loans or credit and guarantee or give security for the performance of contracts by any person or company;

 

3.19 open and operate bank accounts and other facilities for banking and draw, accept, endorse, issue or execute promissory notes, bills of exchange, cheques and other instruments;

 

3.20 accept (or disclaim) gifts of money and any other property;

 

3.21 raise funds by way of subscription, donation or otherwise;

 

3.22 incorporate and acquire subsidiary companies to carry on any trade;

 

3.23 subject to Article 4 (application of income and property):

3.23.1 engage and pay employees, consultants and professional or other advisers; and

3.23.2 make reasonable provision for the payment of pensions and other retirement benefits to or on behalf of employees and their spouses and dependants;  3.24 establish and support or aid in the establishment and support of any other organisations and subscribe, lend or guarantee money or property for charitable purposes;

 

3.25 become a member, associate or affiliate of or act as trustee or appoint trustees of any other organisation (including without limitation any charitable trust of permanent endowment property held for any of the charitable purposes included in the Trust’s objects);

 

3.26 undertake and execute charitable trusts;

 

3.27 amalgamate or merge with or acquire or undertake all or any of the property, liabilities and engagements of any body;

 

3.28 co-operate with charities, voluntary bodies, statutory authorities and other bodies and exchange information and advice with them;

 

3.29 pay out of the funds of the Trust the costs of forming and registering the Trust;

 

3.30 insure the property of the Trust against any foreseeable risk and take out other insurance policies as are considered necessary by the Trustees to protect the Trust;

 

3.31 provide indemnity insurance for the Trustees or any other officer of the Trust in accordance with, and subject to the conditions in, Section 189 of the Charities Act 2011 (provided that in the case of an officer who is not a Trustee, the second and third references to “charity trustees” in Section 189(1) shall be treated as references to officers of the Trust); and

 

3.32 do all such other lawful things as may further the Trust’s objects

What was being suggested, I think, is an anomaly exists because they are classified as a government department and thus subject to government rules on spending. This clashes with what they can do in the private sector (see above).

Whilst that is true, if Defra thought it was an issue, they would have dealt with it years ago.

My own view is that it has more to do with CRT's charitable status. Bearing in mind governments stated intention to withdraw funding in the long term and Pow's statement that Defra were looking at "tapering off" it would be madness to ignore the ONS classification (and, in particular, the reason given for it) because it could lead to the Charity Commission removing CRT's registration.

Edited March 3, 2023 by Allan(nb Albert)

[IanD]

6 minutes ago, Allan(nb Albert) said:

What was being suggested, I think, is an anomaly exists because they are classified as a government department and thus subject to government rules on spending. This clashes with what they can do in the private sector (see above).

Whilst that is true, if Defra thought it was an issue, they would have dealt with it years ago.

My own view is that it has more to do with CRT's charitable status. Bearing in mind governments stated intention to withdraw funding in the long term and Pow's statement that Defra were looking at "tapering off" it would be madness to ignore the ONS classification (and, in particular, the reason given for it) because it could lead to the Charity Commission removing CRT's registration.

 

How the government thinks that a plan to have no subsidy for part of the UK infrastructure with relatively high fixed/running costs and few magic money trees to pluck income from can ever succeed beats me.

 

They might as well think the same applies to public transport infrastructure like railways, rather than realising that these are expensive but get cars/trucks off the roads so justify public funding to make them viable and affordable.

 

Oh dear, I think I've just spotted the problem... 😞

[Scholar Gypsy]

1 hour ago, Allan(nb Albert) said:

What was being suggested, I think, is an anomaly exists because they are classified as a government department and thus subject to government rules on spending. This clashes with what they can do in the private sector (see above).

Whilst that is true, if Defra thought it was an issue, they would have dealt with it years ago.

My own view is that it has more to do with CRT's charitable status. Bearing in mind governments stated intention to withdraw funding in the long term and Pow's statement that Defra were looking at "tapering off" it would be madness to ignore the ONS classification (and, in particular, the reason given for it) because it could lead to the Charity Commission removing CRT's registration.

Your first point is correct. Just because CRT (or any organisation) has the legal powers to do something, it doesn't mean they would be "allowed" to do it.   

In this context the key document is the grant funding letter/agreement, which should set out various things that CRT are required to do, or not do,  in return for the money. 

 

There would still be some constraints here even if CRT were classified to the private sector.  (For example many funding bodies - local authorities, charitable trusts, philanthropic donors etc - will ask/require bodies they fund to pay at least the Living Wage to all their staff.).  The constraints vary a lot across the public sector, eg rather tight for government departments, middling for academy schools, looser for public corporations, whether financial (nationalised banks) or non-financial.  (CRT are the latter, not the former).

[Orwellian]

6 minutes ago, Scholar Gypsy said:

Your first point is correct. Just because CRT (or any organisation) has the legal powers to do something, it doesn't mean they would be "allowed" to do it.   

So who or what would prevent them and by what authority?

[Rambling Boater]

There Is no doubt that C&RT assert themselves as a 'charity'.

 

https://canalrivertrust.org.uk/the-publication-scheme/our-publication-scheme/who-we-are-and-what-we-do

 

Here is the legal definition of a 'charity'.

 

https://www.legislation.gov.uk/ukpga/2011/25

 

Whether they act in a charitable way, is up for debate.

 

https://dictionary.cambridge.org/dictionary/english/charity

[Alan de Enfield]

29 minutes ago, Rambling Boater said:

There Is no doubt that C&RT assert themselves as a 'charity'.

 

https://canalrivertrust.org.uk/the-publication-scheme/our-publication-scheme/who-we-are-and-what-we-do

 

Here is the legal definition of a 'charity'.

 

https://www.legislation.gov.uk/ukpga/2011/25

 

Whether they act in a charitable way, is up for debate.

 

https://dictionary.cambridge.org/dictionary/english/charity

 

 

C&RT report pretty much all of their spending as 'Charitable Activities'

Everything from salaries, to the cost of cars to dredging to cutting the grass.

 

 

 

[Rambling Boater]

8 minutes ago, Alan de Enfield said:

 

 

C&RT report pretty much all of their spending as 'Charitable Activities'

Everything from salaries, to the cost of cars to dredging to cutting the grass.

 

 

 

Not much different to a local council then? 😉

[Scholar Gypsy]

4 hours ago, Orwellian said:

So who or what would prevent them and by what authority?

 

That is a good question. Sorry for the delay, I have been doing some boating today.

 

There are broadly two ways that I can think of:

 

1)  as part of the financial memorandum - typically put in place between a government department and an agency/quango/public corporation that they sponsor, to set out various principles that the agency etc has to follow, reporting requirements etc. This is normally agreed by both parties, in my experience;

2) as part of a grant letter or a funding agreement that is tied to a particular slug of money. Put crudely, if the organization wants the money then they need to sign up to these terms. Again, there is scope for debate as to whether the "rules" are appropriate, or proportionate to the risk that they are being used to manage.

 

So the sponsor department (DEFRA in this case) does not need an specific authority - all this is ancilliary to the powers that is uses to pay the grant to CRT. In theory (I am not a lawyer) their actions could be challenged by means of judicial review, but I am not aware of this ever happening in this area of activity. 

[Orwellian]

15 minutes ago, Scholar Gypsy said:

 

That is a good question. Sorry for the delay, I have been doing some boating today.

 

There are broadly two ways that I can think of:

 

1)  as part of the financial memorandum - typically put in place between a government department and an agency/quango/public corporation that they sponsor, to set out various principles that the agency etc has to follow, reporting requirements etc. This is normally agreed by both parties, in my experience;

2) as part of a grant letter or a funding agreement that is tied to a particular slug of money. Put crudely, if the organization wants the money then they need to sign up to these terms. Again, there is scope for debate as to whether the "rules" are appropriate, or proportionate to the risk that they are being used to manage.

 

So the sponsor department (DEFRA in this case) does not need an specific authority - all this is ancilliary to the powers that is uses to pay the grant to CRT. In theory (I am not a lawyer) their actions could be challenged by means of judicial review, but I am not aware of this ever happening in this area of activity. 

Don't apologise I would much rather go boating.

 

I'm not a lawyer either but I think you are saying that a party that has a legal right (as opposed to a legal duty) may limit those rights by entering into a contract for another benefit eg money.

[Arthur Marshall]

10 hours ago, Midnight said:

I think this just about sums up where we are 
https://www.narrowboatworld.com/14413-what-is-a-charity
"...a decade of neglect has left boaters with a canal system that is arguably not fit for purpose"

The problem with that attitude us that it defines "purpose" to suit itself (and, probably, us). But the fact is that CRTs purpose is not primarily to run a navigation for rich folks' toy boats, or even for paupers like me and our boats, nor a solution to the housing problem, nor, in fact, for authentic floating travellers. It's to maintain a leisure facility combined with a nature reserve, for people who mostly don't pay a penny towards it except as a fraction of their tax bill.

The trick, if there is one, would be to convince CRT, the government and the public that boats buggering about are essential to its survival. Or to find a genuinely profitable comercial use for it.

[MtB]

2 minutes ago, Arthur Marshall said:

The problem with that attitude us that it defines "purpose" to suit itself (and, probably, us). But the fact is that CRTs purpose is not primarily to run a navigation for rich folks' toy boats, or even for paupers like me and our boats, nor a solution to the housing problem, nor, in fact, for authentic floating travellers. It's to maintain a leisure facility combined with a nature reserve, for people who mostly don't pay a penny towards it except as a fraction of their tax bill.

The trick, if there is one, would be to convince CRT, the government and the public that boats buggering about are essential to its survival. Or to find a genuinely profitable comercial use for it.

 

They could charge boats for using it. Hire boats, private boats, canoes, all sorts of boats!

 

It would have to be fee high enough to cover the costs of keeping it navigable.

 

I'm surprised no-one on here has already suggested this...