2013 Charity Review

Rathbones
Charity
Review
Autumn 2013

Rathbones’
Annual
Charity
Symposium
special edition

Also
‘The Wizard of Oz’ and current economic policy
What was the hidden meaning of Frank Baum’s classic story?

Grant funding, education and research
Ruth Corkin unravels the complex VAT rules faced by charities

Unleashing philanthropy
Roberta d’Eustachio gives us her experiences with
Dame Stephanie Shirley and promoting philanthropy

Welcome

Welcome
to the autumn Charity Review 2013
On 12 September we held our annual Charity Symposium at
the Royal Opera House, Covent Garden. Over 350 charity
trustees and advisers enjoyed an afternoon of talks and
topical debate. I am especially grateful to all the speakers.

M

y colleague Julian Rathbone
opened the afternoon with
an excellent presentation on
global energy demand – in particular
demonstrating how fracking might affect
our clients’ portfolios. He was followed
by a lively panel discussion on the art of
stock selection.
William Shawcross, current chairman of the
Charity Commission, spoke on collectivism
and philanthropy in life today. The closing
speech was delivered by Bryn Parry OBE,
co-founder of Help for Heroes, who talked
with passion on the fundraising challenges
he has encountered and overcome, to raise
over £120 million in just five years.
We finished with drinks and canapés
overlooking Covent Garden from the
Amphitheatre Terrace of the Royal Opera
House.
The highlights and webcasts of the Charity
Symposium can be viewed on our website at
www.rathbones.com/charity-symposium-2013

In addition to Rathbones’ Annual Charity
Symposium, this issue also features:
• ‘The Wizard of Oz’ and current
economic policy
Alex Dow, investment director at
Rathbones, illustrates how the classic
children’s story is a metaphor for our
current monetary policy.
• Grant funding, education and research
Ruth Corkin, VAT senior manager at
James Cowper, explains the complexities
of determining VAT with funding,
education and research.
• Unleashing philanthropy
Roberta d’Eustachio, co-founder of
Ambassadors for Philanthropy, details
the inspiration that led to the creation of
the organisation and their aim to inspire
the world.
I hope you enjoy this new-look issue of
the Rathbones Charity Review.
Ivo Clifton

Head of Charities
2 Rathbones Charity Review

In this issue

In this issue

4-11 Rathbones’ Annual Charity Symposium
A special review of this year’s event at the Royal Opera House.
12-15
‘The Wizard of Oz’ and current
economic policy
What was the hidden meaning of Frank Baum’s classic story?

23-25 Charitable Incorporated Organisations
– A new way
Kevin Custis looks at a new way to limit trustees’ liability.

26-29 Enduring values in changing times
Julian Rathbone on the history of the company that bears
his name.

James joined Rathbones from
Barings, where he spent four
years building their UK charity
business with a focus upon
targeted return mandates. He
has previously worked at Collins
Stewart, CCLA and Coutts,
all in charity-focused roles. He
is a Chartered Fellow of the
Chartered Securities Institute,
Trustee of a Catholic Charity
and a founder member of the
Charity Trustees Investors
Association. James also sits
on the corporate governance
committee at Rathbones.

20-22 An interview with Francis Salway
Chairman of the London Community Foundation.

Guest editor
James Brennan

16-19 Grant funding, education and research
Ruth Corkin unravels the complex VAT rules faced by charities.

30-31 Unleashing philanthropy via ambassadors
and ‘Giving’ magazine
Roberta d’Eustachio tells us about her experiences with
Dame Stephanie Shirley and promoting philanthropy.

James can be contacted at:
james.brennan@rathbones.com
Follow us on Twitter:
@Rathbones1742

Rathbones Charity Review 3

Rathbones’ Annual Charity Symposium 2013

Rathbones’
Annual Charity
Symposium
2013



This year’s theme for the Charity
Symposium was persistence, and
sought to address many of
the key issues facing charities,
including regulation, to
showcase best practice among
charities and to talk about some
of the key investment issues of
the day.
To watch the webcasts visit
www.rathbones.com/charity-symposium-2013-webcast



The
art of
stock
selection
Panel
discussion

T

he Rathbone stock selection process
is a complex mix of artistic flair,
scientific and forensic analysis.
It requires an awareness of risk, an
appreciation of market psychology and the
identification of outstanding management
teams. Three of Rathbones’ investment
directors picked a stock and made a case to
the audience for a vote.

Gary Street
Investment Director
Ultra Electronics
Ultra Electronics operates across four
sectors: defence, cyber and security,
transport and energy. It is a mid-cap stock
with a market capitalisation of £1.3bn.
This is a truly international business with
a world-leading position in a number
of niche markets. These sectors include
mission-critical technologies, such as flight
information systems used for baggage
management, aircraft weight and balance
systems, and detection systems that can find
cracks in industrial pipelines. This can help
companies avoid disasters such as the oil
spillage in the Gulf of Mexico. Ultra creates
solutions to its customers’ requirements
that are often different to and better than
its peers.
In the five years to 2012, Ultra has grown
revenues from £412.9m to £760.8m, and
the dividend payout from 19.3p to 40p.
A healthy balance sheet allows the group
to continue to invest in research and
development and provides firepower to
make acquisitions, which the management
team has made prudently and for cash. The
same skilled management have adapted
to the pressures of a reduced defence
expenditure by re-prioritising their business.
It is a class act.



Alex Dow
Investment Director
ICAP

Adrian Maxwell
Investment Director
Booker Group

On initial examination, ICAP does not
look exceptionally attractive. The group
helps professional investors carry out their
investment business through the publication
of price and volume data, facilitating the
buying and selling of securities and then
settling those trades. It makes money from
the volume of buy and sell transactions and
through commissions. It is facing pressure on
a number of levels: new banking regulations
on capital requirements are leading to less
investment activity by banks and therefore
lower volumes for ICAP; the environment
for commissions is also poor.

Booker has three main divisions: Booker
Wholesale, a traditional cash and carry
business; Booker Direct, a wholesale
supplies business delivered direct to the
customer; and the recently acquired Makro,
also a traditional cash and carry business.
The well-respected management team, led
by Charles Wilson, has a simple vision –
efficiency, keeping costs low; appeal, keeping
existing customers and encouraging them
to spend more; and growth, broadening
the range of products and expanding the
number of customers.

However, ICAP is constantly moving into
new markets and new opportunities are
emerging. Innovation and investment in
new technology are improving both the
quality of the group’s service and helping
to cut costs. The move from voice-executed
to electronic trading is a good example,
with electronic trading four times more
profitable. The group’s financial position is
also strong, with cash on the balance sheet.
ICAP is considerably cheaper than the wider
market, with a dividend yield of 5.4%. It is
unloved, but undervalued.

The company does look expensive on
traditional metrics, but the potential revenue
growth and margin expansion make the
company better value. The group has an
excellent management team. It is deriving
economies of scale with good cost control,
which will lead to strong earnings growth
and returns for shareholders.
Ultra Electronics won the public vote!

Main image:
Clive Hexton, far left,
introduces the panel discussion.
Top right: Gary Street
Middle right: Alex Dow
Bottom right: Adrian Maxwell


T

he long-term supply of energy has become an
increasingly prominent topic over the past
few months: blackouts and brownouts have
dominated headlines, while debate continues on
alternative energy sources and fracking. Yet predictions
remain difficult to make: often predictions have been
wildly wrong on energy consumption and pricing and
some healthy scepticism needs to prevail.

Julian Rathbone
Investment Director

Global energy:
a seismic shift?
Demand for energy is set to rise by around 50% by
2035, with developing economies accounting for around
90% of this growth. Demand from developed markets
is likely to be relatively static with slower economic
growth and better energy efficiency. Individually, oil
and nuclear demand is likely to be flat, while coal and
gas continues to grow. Renewables will also see some
demand growth.
The main problem for renewables is cost. Cheap energy
makes for a more competitive and stronger economy
and therefore with low economic growth rates, costs
will continue to be a factor. Gas has the lowest cost.
Nuclear has high start up costs, but renewables are still
relatively expensive, particularly solar. Fossil fuels are
likely to continue to dominate but the major economies
are energy importers and this makes them reliant on less
stable countries. For example, the Middle East accounts



for nearly 20% of all US imports. While decreasing
reliance on these countries is an attractive goal, this
needs to be tempered by the threat of greater instability
if revenues from oil fall.
Shale is the next big story in energy. The total
recoverable shale gas equates to around 17 years of
supply. There are deposits in the US, Argentina, Europe,
China, Russia, North Africa and Australia. This is not
insignificant and has contributed to a rise of 25% in
US energy production over the last decade. Fracking is
a controversial process by which gas is extracted from
shale rock. It has been transformative in the US, with
the country now producing around 80% of what it
consumes and some estimating it will achieve energy
independence within 15 years. But fracking has been
more politically divisive in the UK. There have been
environmental concerns on CO2 emissions, chemicals
leaking into the water table and seismic activity.
Rising US energy production has advantages: it brings
energy security with less reliance on unstable countries,
an improving trade deficit, jobs growth, lower inflation
and higher disposable income for consumers. On the
negative side civil unrest may increase, plus there are
environmental issues to consider. Low gas prices in the
US – around half that in the UK, and a quarter of that
in Japan – put the country at a significant competitive
advantage.
The question is really over the least worst option for
energy supply: shale energy has several advantages and
is likely to have a significant impact on the balance of
global energy and on the global economy, but the effects
are greater in the US than elsewhere. US shale is likely
to have a greater impact on the UK for a number of
reasons; including the fact that the UK is more densely
populated and there are greater environmental concerns.
Energy supply needs to be increased and, for the time
being at least, fossil fuels will remain dominant.

T

here has been increasing scrutiny on charities
over issues such as executive pay, charity
campaigning and politics, plus the failings of
individual charities. The debate has not always reflected
well on the sector, yet charity remains a key element of
British life.

William Shawcross
Chairman of the Charity
Commission

Collectivism,
philanthropy
and life today
In assessing the charity sector, it is important to
remember that nearly half of all charities are tiny, with
budgets of less than £10,000 a year. These rely on the
philanthropy of individuals rather than organisations
which is a situation unique to the UK, but public trust
for the charitable sector is not unconditional. People are
increasingly demanding accountability and probity in
charity, particularly during leaner times.
The Commission’s key role is to protect and promote
public interest in charities. It regulates the sector so that
charities are as honest and transparent as possible. The
Commission has been criticised in recent months by the
Public Accounts Committee for not using its legal power
often enough and we recognise that the Commission can
and must do more to take action against charities that
fail to comply with the regulations.



Since I joined the Commission in October last year
a new board has been put in place, with talented
members such as Peter Clark, former deputy assistant
commissioner in the Metropolitan Police, joining it. The
new board intends to ensure that charities comply with
both the letter and the spirit of the law, but also push for
changes in the law where appropriate. For example, we
have recently asked the government for a general power
of disqualification that allows us to stop unfit people
flitting from charity to charity.
We plan to target charities that repeatedly default in
filing their annual accounts as this is often a sign that a
charity is going astray. The Commission is also stepping
up its counter-terrorism work. The misuse of charities
for terrorist purposes represents a despicable inversion
of everything that charity stands for: we have put out
clear guidance on extremist and controversial speakers.
No-one preaching murder should have the protection of
freedom of speech, or charitable law.
However, it is worth remembering that while many
charities make mistakes, they are rarely venal mistakes.
The Commission wants to give the well-intentioned
majority the tools they need to keep their charities on
the straight and narrow.
That said, the regulator can only do so much. Charities
have a responsibility to explain their decisions to
the public. For example, charity pay has become a
controversial issue: charities need to have the courage
of their convictions and explain their decisions publicly.
We are currently developing a charity-led initiative
for trustees on senior staff salaries and will provide
guidance and information to the public as well as
charities. Charities also need to use their freedom to
campaign responsibly. Trustees need to promote a
charity’s objectives without harming its reputation.
The heritage of philanthropy and voluntary action
in this country is unique and it has produced great
philanthropists such as Paul Hamlyn and William
Rathbone. We want to ensure that charities remain a
golden thread in British society.


And the winner is....!
All those who attended the Symposium
were invited to complete a short
questionnaire on current issues affecting
the charity sector. Each response was
entered into a draw to win a £1,000
donation to the winner’s charity of choice.
Rathbones is pleased to announce the
winner of the £1,000 donation to a charity
of choice is Julian Boardman-Weston.
Julian has chosen the Jubilee Sailing Trust.
Well done and thank you to all those
who entered.


I

n 2007, former Royal Green Jackets
officer, Bryn Parry, made a life-changing
visit to Selly Oak Hospital encountering
young men with multiple amputations and
other traumatic wounds. On the back of that
visit, he co-founded Help for Heroes, which
has to date raised £175m for wounded and
injured soldiers. Rathbones was the charity’s
first corporate sponsor.

The charity’s activities have shifted over
its life. It now focuses more on the road
to recovery. For wounded soldiers there is
dealing with the immediate injury, followed
by medical rehabilitation, but after that
there is the rest of the soldier’s life. These
are young men and women, perhaps as
young as 20 when they are injured, often
with poor education and from areas of

Bryn Parry
Co-founder of
Help for Heroes
The charity started with the intention of
raising £10,000 to build a new swimming
pool at Selly Oak. Since then the charity
has been driven by the persistence of its
volunteers and supported by a country
that instinctively wants to help its armed
forces, but has occasionally been deterred
by the politics of war. The swimming pool
was built and for some time the charity
continued as a money in, money out
organisation, supported by volunteers. Since
then it has grown and now has paid staff but
tries to sustain the same ethos, offering the
best possible value for its donors.
Bryn believes the charity has a single, simple
cause – ‘the blokes’, the men and women of
our armed forces and their families. He says
that this helps keep the charity focused – if
it is looking after ‘the blokes’ it is doing the
right thing. Its activities have been multifaceted, doing as many as 200-300 events
per week.

high unemployment. How do they pick
themselves up when their legs have been
blown off? Help for Heroes’ Phoenix
programme helps soldiers learn new skills
and launch them forward. The charity
has created a number of recovery centres,
including Tedworth House, and centres in
Plymouth, Catterick and Colchester. These
help wounded soldiers identify what they
should be doing in life and get their energy
back, matching them to the right partners,
the right employment specialists and training
them to the right level. The charity strives to
provide 360-degree support: medical, mind,
body, spirit and family.
The charity is conscious of not becoming
just another corporate organisation. In this
it remembers its core values, that it is doing
it for individuals. The Duke of Cambridge
visited the Tedworth centre and said
that these soldiers are not on the road to
recovery, but on journeys of recovery. These
journeys would be cut short unforgivably if
– as a nation – the UK unfixed its attention.



‘The Wizard of Oz’
and current
economic policy
by Alex Dow
Investment Director
Rathbone Investment Management



I doubt that many people watching the 1939
film ‘The Wizard of Oz’ would think of it as a
political and economic allegory. I doubt also
that many would recognise in the film the
basic tenets of the current monetary policy
being employed by the Federal Reserve (Fed) and
other central banks.
Whilst many might find these themes tenuous,
they are there for all to see.

T

he original children’s book was
written by Frank Baum after the 1896
presidential election in the United States
and discusses the politics of the late
19th century. Just as now, this was a
period of severe economic difficulty.
A key component of the economic
problems was deflation and from
1880 to 1896 the price level fell
23%1. A period of unexpected
and severe deflation like this is
especially bad for borrowers, who
see the real value of their debts rise.
In its simplest form, the more that
the price level falls, the more each
borrower becomes indebted. The
more indebted people are, the more
they save and the less they spend or
invest. The economy enters into a vicious cycle
of lower economic output, lower prices and
higher real debt levels.

The typical response by policymakers in these
circumstances is to seek to boost inflation,
which is in turn generally achieved through
debasing the currency (making the
pound or dollar worth less in real
terms). In the late 19th century
this banner was taken up by the
Free Silver Movement. At the time
the US was on the gold standard
and the US dollar was backed by
and convertible into gold. This
meant that, at least in theory,
paper money could be turned into
a dull yellow metal on demand.
The amount of gold into which it
could be converted was fixed and
determined by the United States’
government. The aim of the Free
Silver Movement was to reduce the value of
the dollar by replacing the gold standard with
a bimetallic standard which replaced part of

Macroeconimcs (2nd edition) by N. Gregory Mankiw

1


Image: Library of Congress 1996, Geo. H. Van Norman

the gold with silver. By including a cheaper
metal in the standard, the value of the dollar
would decrease and thus lead to inflation,
which in turn would support those who had
high levels of debt.

William Jennings Bryan,
Democratic presidential candidate 1896 and 1900.

You shall not press down upon
the brow of labour this crown
of thorns, you shall not crucify
mankind upon a cross of gold.

The man behind the iron curtain
In the book and film the gold standard is
represented by the yellow brick road which
leads to Oz. Oz represents Washington and
the green glasses, through which the citizens
viewed the world, stands for the dollar
or greenback. The wizard represents the
Republic politician William McKinley who
campaigned in the 1896 election to maintain
the gold standard, whilst the lion represents
the Democratic nominee William Jennings
Bryan. In a famous speech by Bryan, a
supporter of the Free Silver Movement,
he proclaimed, ‘‘You shall not press down
upon the brow of labour this crown of
thorns, you shall not crucify mankind upon
a cross of gold.’’ The major departure the
film makes from the book comes in the
form of the slippers, which Dorothy uses
to solve her problems and return home to
Kansas. Whilst in the film they were ruby,
apparently to make the best use of the
new Technicolor process, in the book they
were silver.

William Jennings Bryan

Although McKinley won the election and
the gold standard remained unchanged,
inflation did return. The reason for this was
the discovery of vast new reserves of gold
in Alaska, Australia and South Africa. In
addition, new technology enabled gold to
be extracted from ore. The ensuing rise in
the quantity of gold had the same effect as
debasing the currency, boosting the money
supply and increasing inflation. From 1896
to 1910 the price level rose by 35%2, helping
those who had debts.

Macroeconomics (2nd edition) by N. Gregory Mankiw

2


President William McKinley

Image: Courtney Art Studio 1896

Moving to the present day, since the
financial crisis the Fed has been deeply
concerned about deflation. This is because
the US economy has never been more
indebted and therefore the potential impact
of declining prices has never been more
serious. In order to avoid deflation the Fed
has undertaken some extraordinary policies.
Firstly, it has cut interest rates almost to
zero and secondly, it has entered into a
massive programme of quantitative easing.
The object of both of these policies is to
boost the quantity of money in the financial
system and ensure inflation is at least
positive. Just as the Free Silver Movement
wished to debase the currency in order to
protect debtors in the late 19th century, Ben
Bernanke, the Fed Chairman, has arguably
debased the dollar in order to protect
debtors in the 21st century.

My fellow citizens, recent events have
imposed upon the patriotic people of this
country a responsibility and a duty greater than
that of any since the Civil War. Then it was
a struggle to preserve the government of the
United States. Now it is a struggle to preserve
the financial honour of the government.

President William McKinley defeated William
Jennings Bryan in two consecutive elections.

At the time of writing, markets are poised
for a change in policy. There is a strong
chance that current levels of quantitative
easing in the US will be reduced from $85
billion per month, possibly as early as the
September Fed meeting, and most investors
expect it to stop completely by mid-2014. It
appears that policymakers believe the threat
of deflation is waning and the dollar has
been sufficiently debased – only time will
tell whether this will get us back to Kansas.

Alex Dow is an investment
director in Rathbones’ charity
team and can be contacted at
alexander.dow@rathbones.com



by Ruth Corkin
VAT Senior Manager
James Cowper



In VAT terms, these three
categories are among
the most complex. Aside
from the fact that the
UK has had its national
wrist slapped by the
European Commission for
including research in
its list of activities for
the public good, which
can be exempt from VAT,
the rules as to what
constitutes ‘education’
are complex.

T

he confusion that has arisen due to the decisions
in three UK Lower Tier Tax Tribunal cases
(mentioned in the Rathbones summer Charity
Review) in relation to grant funding and non-business
supplies, as well as HM Revenue and Customs’
(HMRC) reluctance to admit that its guidance is now
a little outdated, means it has never been more difficult
to determine the VAT treatment of supplies made in the
not-for-profit sector.

It has never been more difficult to
determine the VAT treatment of supplies
made in the not-for-profit sector.
Grant funding
What all charities and not-for-profit bodies should
remember is that the responsibility rests with them
to determine the VAT treatment and not the funder
or the recipient. Therefore, contracts or agreements
that mention VAT are usually either to protect the
funder (e.g. wording such as “All monies paid to the
contractor will be deemed to be inclusive of VAT”) or
to enable the provider of any services to recoup a VAT
charge if it is determined at a later stage that VAT is
due. For example, “The Local Authority will pay to the
contractor, upon production of a valid VAT invoice, an
amount equivalent to the VAT due on the supply to it.”



Case studies
Obviously, from a charity’s point of view,
the second phrase is preferable as it allows
for recovery of any VAT at a later stage
should HMRC deem it due. However, not
all funders would be in a position to recover
the VAT charged, and so the first phrase is
more likely to be used. If a charity has such
a phrase in its agreements then any VAT
that becomes due on the supplies under the
agreement would have to come out of profit
or working capital.
When do HMRC deem that VAT is due?
The easy answer to this is: if the supplies
are in the nature of services provided to
the funder and those services would be
taxable if provided by another taxpayer or
to another taxpayer. Trying to determine
whether a business supply has been made
depends upon the characteristics of the
supply, such as frequency, amount paid,
profit motive, etc. The absence of any profit
does not preclude the activity from being a
business supply.
It appears that HMRC considers its
guidance to still be current despite enquiries
for a need to update. The cases mentioned
in the guidance are now rather long in the
tooth and the funding streams have changed
significantly. This makes the decisions by
charities and their advisers difficult, making
it likely that HMRC’s Charities Unit is to
be inundated with requests for clarification.

The tribunal decision of the South African Tourist Board v
the Commissioners of HMRC.
The South African Tourist Board (SATB) provided information
and marketing to the people of the UK. It was set up as a statutory
body in South Africa (although not a UK statutory body). The
tribunal decided that the provision of the services in return for
funding from the South African government was a business supply
that would be taxable if the services had been provided by a
normal taxpayer who was not a statutory body. In other words,
had the SATB not been a statutory body, the services it provided
would have been taxable business services, putting it in the same
position as a commercial taxpayer making similar supplies.

The decision for the case of Hope in the Community Limited v
the Commissioners of HMRC, had an even closer impact.
The appellant, Hope in the Community Limited (Hope), had
treated the income from a purported grant as outside the scope of
VAT. However, there were services being provided, and a contract
existed that stated it was a ‘service level agreement’ (SLA). HMRC
checked Hope’s records and decided there were distinct services
being provided to the funder under the terms of the SLA and
these services were taxable or subject to VAT. Hope appealed as
it considered that the funding was not for any particular services
and the funder derived no benefit from providing the funding. The
tribunal decided the paperwork trail showed the contrary and VAT
was consequently due.

The final case of Groundwork Cheshire Limited v
the Commissioners of HMRC is unusual.
The appellant, Groundwork Cheshire Limited (GCL), was arguing
that its income from a block grant was actually consideration for its
supplies and was, therefore, taxable. As its supplies to the end user
were taxable, the money received to make those supplies was also
taxable. GCL provided services to small businesses and the funding
was provided in order that the charge for this was small or even
non-existent. The tribunal agreed that the funding was third party
consideration for the making of those supplies and not a grant.



Education
The provision of education (including
vocational training) is exempt from VAT
when it is provided by a teacher acting in
his or her own right; by an ‘English as a
foreign language body’ as a result of funding
ultimately from the Skills Funding Agency,
or under the provisions of section two of the
Employment and Training Act 1973 or by
an eligible body. An eligible body is usually a:
• school
• university
• further education college
• public body or
• body that is precluded from distributing its
profits and reinvests any profits made from
education back into educational activities.

HMRC regard education as
meaning a class, course or lesson of
instruction or study in any subject,
regardless of when and where it
takes place.
The term ‘education’ is not defined in law.
HMRC regard education as meaning a class,
course or lesson of instruction or study in
any subject, regardless of when and where
it takes place. It includes lectures, distance
learning, educational seminars, conferences
and symposia, together with sporting and
recreational courses.
Vocational training is defined as training,
re-training or the provision of work
experience for any trade, profession or
employment, or any voluntary work in
connection with education, health, safety
or welfare, or carrying out of activities of a
charitable nature.

In addition, supplies closely associated
with education are also exempt from VAT,
provided that:
• the supplies are made by or to the person
supplying the main supply of education
• the goods or services are for the direct
use of a pupil or student receiving the
education
• the supplies made to the person supplying
the education are provided by another
eligible body.
Supplies that are closely related include
accommodation,
catering,
transport,
school and field trips (provided that there
is no intention to make a profit on these).
Examination services are exempt in their
own right.
Research
The supply of research between eligible
bodies was exempt from VAT until 1 August
2013. HMRC have agreed that any contract
for research entered into prior to 1 August
(regardless whether the research had started
prior to that date) can remain exempt until
the contract is completed. The exception
to this is when there is a major variation
to the contract after 1 August 2013 (such
as duration, amount of funding, etc). This
removes the necessity for eligible bodies to
charge VAT for research that is ongoing at
1 August 2013.
This change has been forced on the UK
by the EU Commission, who decided that
the UK had interpreted the definition of
education too widely for the purposes of
exemption. Government funded research
or research for the public good will remain
outside the scope of VAT.

Ruth Corkin is VAT senior manager at James
Cowper and specialises in charities and education.
She can be contacted at rcorkin@jamescowper.co.uk
or on 01865 861166.


An interview with Francis Salway

An interview with

Francis Salway
Chairman of the London
Community Foundation



H

ow did you get involved with
community foundations?
I first became involved with
community foundations eight years ago
through business. As a property company,
Land Securities is involved in very large
development schemes and occasionally
these can seem disconnected from the
people that live around them. We wanted
to get involved with the local communities
at the grass roots level: I had not heard of
community foundations before, but they
seemed a great way of doing this.
Land Securities has a large site around
Ebbsfleet station (on the Eurostar line) which
will eventually be developed as 10-12,000
homes for some 20-30,000 people. That’s
massive in the context of the neighbouring
towns of Dartford and Gravesend, so we
wanted to involve the communities.
That interaction worked very well, so the
company then got involved with the local
community foundation in Southwark,
where we had another large development
project in an area which was characterised

by the disparity between new developments
fronting the River Thames and some older
estates with high levels of deprivation. Again,
that worked well and I was so impressed with
community foundations that my wife, Sarah,
and I set up an endowment, initially in Kent
and more recently in London as well. I’m an
ardent believer in community foundations and
that’s largely how my wife and I now manage
our charitable giving.
What is special about community foundations?
I think a lot of individuals and companies have
a real identity with a place: often donors have
been successful in their careers, but know there
is another side to the town or city in which they
live or work. Community foundations enable
you to support more vulnerable people where
you live and, for me, to give back locally is both
logical and rewarding.
Where community foundations also stand out
is their grass roots expertise, which enables
them to support small community groups
that really understand the issues at the level
of a particular estate or area. And there’s real
tailoring for donors: at a certain level of giving

Having managed an award-winning property fund for
Standard Life, Francis Salway joined Land Securities,
the FTSE 100 property company, in 2000 and became chief
executive in 2004.
He stood down in 2012 and now chairs the London
Community Foundation (LCF) as well as a housing
association in Tunbridge Wells, where he lives. He is
also a non-executive director of Next and a visiting
professor at the London School of Economics.



you can have your own named fund, you can choose
the issues you want to support, you can be involved in a
selection of the projects that your money supports and
you can meet the people delivering those projects.

Why is matched funding important?
The government will give 50% matching to new
endowment giving at community foundations across
the UK until March 2015. With current marginal tax
rates, when you add the tax saving into 50% matching
you’ve effectively got very close to a two-for-one offer
for higher rate tax payers.

A lot of charitable giving is far removed from the
coalface, but this is a chance to get really involved. This
is as important as the giving to the beneficiaries because
everybody is linked in, which is unusual. For individual That’s quite an unusual offer – it’s a once-in-a-lifetime
donors, I think the ability to get involved as a family – opportunity to do something for the long-term. In
with your husband or wife or, if
London, nearly £4 million has
you leave a legacy, through your
been put aside for matching
I believe wholeheartedly
children – is also very appealing.
and it needs to be used. But it’s
not just London: there are over
in the work of community
Why are community
50 community foundations,
foundations and the
foundations successful?
covering virtually every area of
opportunity to be part of
There was a feature in the
the UK.
Evening Standard about the
the movement in London is
Dispossessed Fund. It featured
How do you generate money
one I simply couldn’t miss.
somebody who had suffered
to give an immediate boost to a
I hope that more and more
domestic abuse and decided
project, yet hold some back for
to help other people in similar
the longer term?
Londoners will join us as
circumstances. She then began
The way my wife and I have
we strive to build a stronger
to get involved with young
done it is simply giving from
and fairer future for our
people on an estate. She helped
income, as we take a very
them to get more training, built
long- term perspective. But
communities.
their confidence to apply for
donors can also give a certain
apprenticeships and then into full-time employment.
amount by way of endowment and ask the community
foundation to use the Gift Aid earned for immediate
Helping such projects is exactly the sort of thing that giving. Or they can create a fund that is endowed and
community foundations do incredibly well because top that up annually. Both make an immediate impact,
wealthy individuals or companies often wouldn’t know backed up by long-term support.
where to start to access an individual or group like this
– nor how to distinguish between the groups which are What are the levels required to create your own,
effective and those which are not.
bespoke fund?
It varies between community foundations. In London,
In my experience, small charities often have an for immediate giving the level is £25,000 and for
incredibly entrepreneurial feel because, just like those endowments it’s £50,000 to have your own fund,
who start small businesses, the people that run these named and under your direction.
small charities are driven by a passion. They’re lean,
fast-moving and effective. They may have a different For further information on the London Community
primary objective, but the same wonderful attributes Foundation please visit www.londoncf.org.uk
around making things happen are so evident.


Charitable incorporated organisations – A new way

Charitable
incorporated
organisations

A new way
by Kevin Custis
Director
Rathbone Trust Company

New for 2013 in England and Wales (but since
April 2011 for Scotland) is an extra option
open to charitable trustees who do not
already have the protection of the corporate
veil (a limit to their own personal liability in
common words) by the charity being a company
as well as a registered charity.


Charitable incorporated organisations – A new way

A

lot of charities are either trusts
or associations with varying
degrees of formality ranging from
long governing instruments to very short
constitutions. What they tend to have in
common is the notion that, should the
charity become insolvent, the trustees might
have to contribute out of their own private
resources. That is clearly undesirable in
terms of attracting and retaining trustees
and promoting rather than punishing good
deeds in general. The only previous option
was to form a limited company, but that

The only previous option was to
form a limited company, but that was
attended with all the extra costs and
work of satisfying Companies House
and its legal requirements as well
as those of the Charity Commission
and charity law.
was attended with all the extra costs and
work of satisfying Companies House and its
legal requirements, as well as those of the
Charity Commission and charity law.


To bridge the gap (or stand neatly within it
if you prefer) is a new Charity Commissionsponsored entity known as the ‘charitable
incorporated organisation’ (CIO).

CIOs have the key advantage
of limiting the trustees’ personal
liability without having to
be registered and subject to
Companies House.
If the Scottish experience is anything to
go by they should be popular. CIOs have
the key advantage of limiting the trustees’
personal liability without having to be
registered and subject to Companies House.
In many ways this should commend CIO’s
to most unincorporated trustees as an
obvious course of action, but are there
any factors to persuade trustees of
unincorporated charities to either stay as
they are or set up a limited company?

Upcoming events

Apart from being subject to company
law (not often a positive) ‘full blown’
companies can borrow money more
easily with limited liability remaining.

The argument not to change is as much
about the process of changing anything
to do with a charity’s constitution.
For example:

Upcoming
events

Rathbones has been nominated for the Charity Times
Investment Management Award 2013. This is the
third consecutive year that we have been nominated.
The ceremony takes place on 16 October at the
Lancaster London Hotel.

1. Plenty of long forms to complete and
have signed.
2. A rigorous look at the constitution that
may be quite ancient for some (that
might be a good thing though if the
constitution is no longer fit for purpose).
3. The requirement to get consent where
there are lots of members of a society or
friends association at a forum such as an
extraordinary meeting.

For more information on the event, please see
www.charitytimes.com/awards

Kevin Custis is a director of
Rathbone Trust Company
and can be contacted at
kevin.custis@rathbones.com

Rathbones’ charity
trustee training
Following on from the success of the trustee training
we ran in the spring of 2013, we will be running a
number of trustee training events across the UK in
spring 2014.

4.
Changing banking and contractual
arrangements,
where
long-existing
arrangements such as regular gifts by
standing orders, may not wish to be
disturbed (asking a donor to change a
standing order might encourage them
not to bother and to stop it!).

What can ‘full blown’ companies
do that CIO’s cannot?
Apart from being subject to company law
(not often a positive) they can borrow money
more easily with limited liability remaining.
This might be vital to some charities as well
as a thing some charity Trustees may want
to have hard wired to avoid.

Charity Times
award ceremony 2013

To register for more information, please contact
Francesca Monti at francesca.monti@rathbones.com
or on 020 7399 0119.

Charity Finance Group
Midlands Conference 2013

We are delighted to announce our sponsorship of the
first CFG Midlands Conference, held at the Hyatt
Regency Hotel in Birmingham on 6 November 2013.
Rathbones will be exhibiting at the conference, and
running a lunchtime workshop on The search for
income in a low yield environment. The conference
aims to raise awareness of changes in legal and
regulatory framework to those working in the charity
sector and is set to be an informative and enjoyable day.
Further information can be found at
www.cfg.org.uk/events/event-information/2013/
november/evt30929.aspx


Enduring values in changing times

Enduring
values in
changing
times
by Julian Rathbone
Investment Director



It rarely pays to rely on successes from
the past to secure the future, yet we should
not forget where we have come from.
In this respect, the history of Rathbones
helps to shape our current ethos: we aim
to learn from the past and, where possible,
focus on those areas where we have had
the most positive impact.
Banks and investment management companies like to
highlight their august histories, emphasising longevity,
solidity and lasting values. ‘Rathbones, established
1742’ is just such an example, implying that a company
that has been around for 271 years must be doing
something right. Yet many companies established at a
similar time have run into trouble because of problems
far removed from the values of their founders.
Barclays traces its origins back to 1690, though the
name only became associated with the business in
1736 when James Barclay became a partner. In recent
years, however, its Quaker founding principles (honesty,
integrity and plain-dealing) have often seemed notable
by their absence. The downfall of Barings (founded in
1762) in 1994 was far more dramatic, but again resulted
from a departure from the standards upon which its
reputation had been built.
So, what value does corporate history have and should
clients of Rathbones care that the firm has a rich heritage?
We believe that our history is immensely valuable, but
only if we remain committed to the guiding principles
of our predecessors. Likewise, these values are not
something that senior staff ‘grow into’, like a cloak of
respectability that is put on after promotion, but are at
the heart of every employee’s daily work. We are very
aware of the trust placed in us by our clients and strive
to conduct our business and ourselves accordingly.

The Story of Rathbones by David Lascelles details the
history of our firm and explains how the firm grew
from the wood sawyer and timber merchant business
established in Liverpool in the 1720s to be the FTSE
250-listed wealth management business it is today. It
is a fascinating book. Although 271 years of history
cannot be summed up in one sentence, the history of
the firm broadly divides between the series of merchant
partnerships run by William Rathbone II to William
Rathbone VI between the 1720s and 1902, and the
wealth management business that has developed over
the last 110 years.
It is interesting that the values that underpinned each
of these two very different eras in our history are still
evident in the way we operate today. Although it would
be disingenuous to claim that we know exactly what the
Rathbones of the 18th and 19th centuries stood for (or
that they were always above board in their dealings),
we do know a great deal about their lives and their
approach to business.
William Rathbone III is the first member of the family
about whom we have a clear picture. History shows him
to be a diligent businessman, who developed the business
founded by his father and demanded honesty, integrity
and financial sobriety from the firm’s ship captains.

Julian Rathbone is an investment director at
Rathbones and can be contacted at
julian.rathbone@rathbones.com



1742
Originally founded as timber
and shipping merchants
in Liverpool in 1742; by
World War I Rathbones was
managing investments for
wealthy private investors.

But it was William III’s Quaker beliefs that
marked him out – contemporaries described
his sober, devout and humble character.
His wider social beliefs were informed by
his religion and, in 1788, he and his son
were two of the founders of the Liverpool
branch of the Society for the Abolition of
the African Slave Trade.
This was radical for a Liverpool merchant as
many of his peers profited directly from the
slave trade or from trade in goods produced
by slave plantations: indeed, he was
booed off the floor of the Liverpool Stock
Exchange by pro-slavery traders. Perhaps
this translates into Rathbones’ belief in the
modern era that business must be ethically
sound. His son and grandson, Williams IV
and V, also campaigned on issues ranging
from slavery, opposition to the ongoing
war with France, electoral reform, social
deprivation and the East India Company.
William VI (1819-1902) founded the district
nursing system (with backing from Florence
Nightingale), inspired by the care his wife
received before her early death. He was also
a founder of University College Liverpool
in 1881, (which became the University of
Liverpool in 1903) and served as an MP
for the city for nearly 30 years. In spite of
this public service, he also played a major
role in the family business, which he ran
with his brother Samuel. During this time,
Rathbones established highly-profitable
businesses in China and the United States,
yet was prepared to risk them over concerns
about the opium trade and the US southern
states’ support for slavery.

1788
Liverpool branch of the
Society for the Abolition of
the African Slave Trade is
founded – William Rathbone
III is a founding member.

1988
Comprehensive Financial
Services merges with
Rathbone Bros Co
and becomes Rathbone
Brothers Plc.

1992
Admitted to the
London Stock Exchange
– full listing.

1996
Acquisition of
Neilson Cobbold.

2004
Formation of specialist
ethical investment unit
Rathbone Greenbank
Investments.

2006
Acquisition of Dexia’s UK
private banking business.

2008
Acquisition of Citywall
Financial Management
in Exeter.

2009
Acquisition of a number
of private client portfolios
from Lloyds Banking
Group and the entry into an
exclusive client referral and
distribution agreement.


This period demonstrates Rathbones’ social
awareness, commitment to good causes,
and belief that morality is more important
than profit. I believe these traits are still in
the DNA of Rathbones: our employees raise
substantial amounts of money for charity
and we certainly believe that business must
be done on an ethical basis. Rathbone
Greenbank Investments, our ethical
investment management business, is the
clearest evidence for this, but good ethics
are at the heart of all of our activities.
In the 20th century, Rathbones evolved
from being a partnership run by the family
into the business of today. Necessarily
this involved changes, but the company
continued to adhere to principles that served
it well. Following the Second World War,
under Vere Cotton and Larry Rathbone,
the company was rebuilt by focusing on
client service and building new relationships
only through personal recommendations.
Their good work continued under Sebastian
Rathbone, who steered the firm through the
dramatic changes in the financial services
industry in the 1980s.
Rathbones is a forward-looking company
and, in practice, we are more interested in
the years that lie ahead rather than the past.
However, we believe that the values upon
which the firm was established are just as
relevant today and will help us to look
after our clients well into the future. While
unsure whether I am the most appropriate
(and unbiased) person to write this article,
I hope it has brought out some of these
values, while adding a little historical colour
to the Rathbones of today.


The impressive atrium of the Port of
Liverpool Building, where Rathbones’
Liverpool office is based. The
floor mosaic is the inspiration for
Rathbones’ heritage icon.


The philanthropist voice worldwide

Unleashing
philanthropy
via ambassadors
and ‘Giving’ magazine
The philanthropist
voice worldwide
by Roberta d’Eustachio
Co-founder
Ambassadors for Philanthropy

Dame Stephanie Shirley speaking at
the 2010 Rathbones’ Annual Charity
Symposium at The Royal Society.

The philanthropist voice worldwide

D

ame Stephanie Shirley has often said how
humbled she was to be asked by the then prime
minister, Gordon Brown, to take this honorary
ambassadorial post. Apparently, she was selected
because the powers that be thought she represented a
modern model of philanthropy, moving away from
being a ‘cheque-writing giver’ to one with strategic
ambitions and goals.

The best way to start is to tell you about
my experience serving as chief of staff to
Dame Stephanie Shirley, the government’s
founding ambassador for philanthropy
from 2009-2010 and how that appointment
inspired us to found the Ambassadors for
Philanthropy charity.
The charity’s aims are to inspire
countries worldwide to appoint their
own ‘ambassadors’ as well as to give
philanthropists a voice.

Dame Stephanie had certainly learnt to speak publicly
about her giving, empowering others to emerge from
anonymity and share their philanthropic experiences and
motives. She had first-hand knowledge of the goodness
and generosity of the British people welcoming her as a
Jewish child refugee. She had always been thankful for
being welcomed, and never forgot the generosity shown.
It is likely that the original idea for such a position
was a bit thin. There was no rigorous brief from the
Cabinet Office of the third sector, providing Dame
Stephanie with what was expected of her. It was just
the opposite.

At that time Britain was not really known for talking
out loud about their giving. She felt that if we were to
do anything lasting at all we would give philanthropists
a voice and encourage them to talk about their giving,
so that others might understand and begin to talk about
why they do what they do when they give.
One of the seeds sown has been our site
www.ambassadorsforphilanthropy.com, which includes
videos of philanthropists discussing giving – the nuts
and bolts, the motives and emotions, the problems and
delights. For those who say the reserved British don’t
talk about money, or what they do with it, this site
proved that they are open to sharing their unique stories
of putting money to good use.
From the website we began to get enquires from around
the world asking how those from other countries could
appoint their own Ambassador(s) for Philanthropy and
in doing so inspire a culture of giving. This then led to
an avalanche of invitations to speak and travel, creating
networks in every region of the globe.
We are accelerating our mission via influence by
launching Giving magazine in early 2014 – the
philanthropist voice worldwide. Our digital global
publication is targeted to reach more than five million
philanthropists worldwide via the causes they support.
Giving magazine will offer philanthropist stories,
profiles, interviews and video embeds and will allow
charities themselves to insert and customise stories of
their own donors in every issue.
In conclusion, let me say, across the world we know that
philanthropy is a promising force for good, channelling
resources from the successful and wealthy to invest in
charities and social enterprises. We invite you all to join
us to unleash philanthropy in Britain and worldwide.

For more information go to:
www.ambassadorsforphilanthropy.com
www.givingmagazine.com


Contact us
If you would like further information or to arrange an initial meeting, please call
Francesca Monti on 020 7399 0119 or email francesca.monti@rathbones.com
Head ofﬁce
1 Curzon Street, London W1J 5FB
Tel. 020 7399 0000
christopher.a.dean@rathbones.com
www.rathbones.com
We also have offices at the following locations:
Aberdeen

Tel. 01224 218 180 www.rathbones.com/office/aberdeen

For ethical investment services:

Birmingham Tel. 0121 233 2626 www.rathbones.com/office/birmingham
Bristol
Cambridge

Rathbone Greenbank Investments

Tel. 0117 929 1919 www.rathbones.com/office/bristol
Tel. 01223 229 229 www.rathbones.com/office/cambridge

Tel. 0117 930 3000
www.rathbonegreenbank.com

Chichester Tel. 01243 775 373 www.rathbones.com/office/chichester
Edinburgh

Tel. 0131 550 1350 www.rathbones.com/office/edinburgh

For offshore investment management services:

Exeter

Tel. 01392 201 000 www.rathbones.com/office/exeter

Kendal

Tel. 01539 561 457 www.rathbones.com/office/kendal

International*

Liverpool

Tel. 0151 236 6666 www.rathbones.com/office/liverpool

Lymington

Tel. 01590 647 657 www.rathbones.com/office/lymington

Newcastle

Tel. 0191 255 1440 www.rathbones.com/office/newcastle

Tel. 01534 740 500
www.rathboneimi.com

Winchester Tel. 01962 857 000 www.rathbones.com/office/winchester

Important information
The value of investments and the income from them may go down as well as up and
you may not get back your original investment. Past performance should not be
seen as an indication of future performance. Changes in rates of exchange between
currencies may cause the value of investments to decrease or increase. Information
valid at date of presentation. Tax regimes, bases and reliefs may change in the future.
Rathbone Brothers Plc. is independently owned, is the sole shareholder in
each of its subsidiary businesses and is listed on the London Stock Exchange.
Issued and approved by Rathbone Investment Management Limited which is
authorised by the Prudential Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority. Registered office:
Port of Liverpool Building, Pier Head, Liverpool, L3 1NW. Registered in England
No. 01448919. Rathbone Greenbank Investments is a trading name of Rathbone
Investment Management Limited.
*Rathbone Investment Management International is the Registered Business Name
of Rathbone Investment Management International Limited which is regulated
by the Jersey Financial Services Commission. Registered office: 26 Esplanade, St.
Helier, Jersey JE1 2RB. Company Registration No. 50503. Rathbone Investment
Management International Limited is not authorised or regulated by the Financial
Conduct Authority in the UK. Rathbone Investment Management International
Limited is not subject to the provisions of the UK Financial Services and Markets Act
2000 and the Financial Services Act 2012; and, investors entering into investment
agreements with Rathbone Investment Management International Limited will not

have the protections afforded by those Acts or the rules and regulations made under
them, including the UK Financial Services Compensation Scheme. This document
is not intended as an offer or solicitation for the purpose or sale of any financial
instrument by Rathbone Investment Management International Limited. The
information and opinions expressed herein are considered valid at publication, but
are subject to change without notice and their accuracy and completeness cannot be
guaranteed. No part of this document may be reproduced in any manner without
prior permission.
© 2013 Rathbone Brothers Plc. All rights reserved. This publication is printed on
material sourced from responsibly managed forests and from 10% recovered fibre,
diverting waste from landfill. It is certified in accordance with the FSC® (Forest
Stewardship Council®) and manufactured under strict environmental management
systems, the international ISO 14001 standard, EMAS (Eco-Management Audit
Scheme) and the IPPC (Integrated Pollution Prevention and Control) regulation.
All rights reserved.

and

are registered trademarks of Rathbone Brothers Plc.

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