A presentation on the offloading of sporting assets by local and regional authorities. This presentation was given by Muckle LLP as part of the Sport and Recreation Alliance's, Sport and the Law Conference 2015.

1. Local & Regional Authorities offloading
sporting assets: the legal impact on your
constituents and you
John Devine, Muckle LLP

2. Agenda
• Localism Act 2011
• Thinking of taking on any LA facilities?
• Legal structure
• Tax status
• Legal interest(s) in Property
• Developing facilities
• Community use

3. Localism Act 2011
• Introduced November 2011
• Devolve more decision making powers from
Central Government
• Individuals, communities and councils
• Focus on
– competence
– community rights
– neighbourhood planning
– housing

4. Key Measures
• New freedoms and flexibilities for local
government
• New rights and powers for communities and
individuals
• Reform to make the planning system more
democratic and more effective
• Reform to ensure decisions about housing are
taken locally

5. Highlights
• General power of competence
– Community rights
– Community right to challenge
– Community right to bid
• Neighbourhood planning
• Community right to build
• Standards
• Local authority governance

6. Community right to challenge
• Implemented June 2012
• Voluntary and community groups, parish
councils or two or more members of local
authority staff have the right to express an
interest in running a service currently
commissioned or delivered by a local
authority
• LA must run a competitive procurement
process

7. Community right to bid
• Implemented September 2012
• Nominate buildings/land that they consider to be of value
to the community
• Included on a local authority maintained list
• If assets on the register are put up for sale, the community
is given a window of opportunity to:
– express an interest in purchasing the asset; and
– bid
• It can be listed if “a principal (“non-ancillary”) use of the
asset furthers (or has recently furthered) the community’s
social well-being or social interests (which include cultural,
sporting or recreational interests) and is likely to do so in
the future”

8. Examples
• Newcastle United Supporters Trust applied successfully for
St. James’ Park to be listed as an ‘asset of community value’
under the Localism Act

9. Along with....
Manchester United’s Old Trafford & Liverpool FC’s Anfield Stadium

10. Community Right to Build
• Allows local communities to undertake small-scale,
site-specific, community-led developments
• Freedom to build new homes, shops, businesses or
facilities where they want them, without going through
the normal planning application process
• To proceed the proposals
– require more than 50% of local people to agree and vote
through a community referendum
– must meet some minimum requirements (for example,
they should generally be in line with national planning
policies and strategic elements of the local plan)

11. Impact?
• Some criticism that the Act
– does not challenge deep-rooted centralisation in
the UK
• London receives central grants for 95% of funds
• Other global cities have more autonomy
– New York controls 67% of its funds
– Paris controls 83 % of its funds
– risks the ability of cities to grow and meet the
demands of being a “global city”

12. Thinking of ‘taking on’ any LA assets?
• Decide whether your legal structure and/or
tax status are fit for purpose
• Due diligence
• Business Plan
• Funding
• Conditions of transfer
• ‘Sweating the asset’

13. Consider your Legal Structure
• Consider incorporating if you
– employ staff
– enter into contracts or arrangements involving risk
– hold interests in property
• Limitation of liability
• Separate legal personality
• Indemnification of directors
• NGB approval?

14. Consider your Tax Status: Charity?
• Gift Aid and tax effective giving
• NNDR – Rate Relief
• Increased opportunities with grant funders
• Opportunities for support from commercial
partners (sponsorship or CSR?)
• Tax and VAT reliefs
– VAT zero rating on new indoor facilities
– qualifying fundraising events
– SDLT relief

15. Gift Aid Scheme
• No minimum limit
• Free of inheritance tax (IHT), capital gains tax (CGT)
and income tax
• Individual donors must be UK taxpayers AND from
6 April 2012 pay an equivalent amount of tax in the
same year in which donation is made
• Available to
– registered charities
– CASCs

16. Gift Aid Scheme
• Corporate donations
– paid gross of tax
– deductible from taxable profits
– Corporation Tax (CT) relief
– Available to CASCs from 1 April 2014
• Individual donations
– basic rate income tax (20%) reclaimed by charity
(i.e. an extra 25p per £1 donation)

17. Don’t forget...
• ...the higher rate tax relief since you can
incentivise high earners and high net worth
individuals to contribute tax efficiently

18. Rate Relief
• 80% mandatory relief from non-domestic
business rates for charitable clubs and CASCs
• 20% discretionary relief may be available
• Wholly or mainly for charitable purposes
• Business Rates Retention Scheme
• If shared facilities, consider:
– average footfall per week
– space occupied (%)
– hours usage

19. Due Diligence
• Ask not ‘Can we’ but ‘Should we’?
• Know exactly what you are committing to
– Utility costs
– Repair and maintenance costs
– Non-domestic business rates
– Rent
– Establish the true annual cost (not subsidised)
• Decide only from an informed position

20. All that glisters is not gold...

21. Development opportunity?

22. What assets do (or will) you have?
• Playing fields
– Grass (football, rugby, cricket)
– Astroturf (hockey, football, rugby)
– Hard court (tennis, netball, basketball etc)
• Gym (sports hall, cardio and weights)
• School hall (theatre)
• IT facilities (adult education, Back to Work)
• Playground/car park (events, car boot sale)
• Bar/Cafe

23. Legal Interest in Property
• Licence to occupy = contractual permission to
use premises
• Lease = grant of a right to exclusive possession
for a determinable period of time
– security of tenure
– maintenance and repairing obligations
– requirement for grant funding
– charging of property

24. Beware of VAT implications

25. Beware of VAT implications
• Take independent VAT advice
• VAT treatment depends on tax status and the
nature of the supplies
– CASC or charity = ‘eligible body’ for VAT purposes BUT
must be recognised by HMRC
– e.g. Block booking of 10 or more sessions is VAT exempt
(Sch 9, Group 1, para 1(m), Note 16) but ‘ad hoc’ bookings
or less than 10 bookings is VATable

26. Pitch Hire
• Separate supplies of pitch hire and league
management services by a single supplier
• HMRC v Goals Soccer (2012)
– single session = standard rated
– block booking, usually for 10 or more sessions at
frequent intervals = VAT-exempt, if conditions met
– HMRC asserted that all of the taxpayer's supplies
were standard-rated
– Held: Two separate supplies

27. Why is VAT important?
• VAT charged on the construction costs of projects:
– Applicant not registered for VAT = cannot recover VAT
– Applicant registered for VAT but not entitled to recover VAT
• Both represent an additional cost to the applicant
• Irrecoverable VAT incurred by the applicant is likely to
increase the level of funding applicant requires from
the NGB or grant funder(s)
• Reduces total funding available for the grant

28. Thinking of building anything?
• Consider possible eligibility for VAT zero rating
– Schedule 8 Group 5 item 2(a) VAT Act 1994
• Zero-rating provisions apply to construction of
a building intended for use solely for a
‘relevant charitable purpose’
– used by a charity in its charitable non-business
objective (i.e. no charge for use or below cost)
– used as a village hall or similarly in providing social
or recreational facilities to the local community

29. Indoor or Outdoor – does it matter?

30. Indoor or Outdoor?
• Indoor = Potential for zero rating only if
conditions met
• Outdoor = always standard rated whether grass
or artificial
– Projects which fulfil the same charitable objectives
can therefore have different VAT treatment!
• Design & Build contract
• Separate supplies of professional services =
always standard rated
• Take legal and tax advice to minimise the level of
irrecoverable VAT

31. How can you use club assets to
generate additional revenue?
• Appoint external recreational sports services
provider (managing agent) to manage facilities ‘out
of hours’
• Local community association
– Usually registered charity
– Wide leisure time occupation objectives
• Direct external hire
– Clubs and/or community sports charities

32. Community Coaching

33. Community Use
• Use by public in furtherance of club objects (if
permitted by terms of transfer)
• Status of Parties – NGB or Club and Third Party (i.e.
managing agent or community association)
• Clear and certain separation of responsibilities
• Purpose of the agreement
– Vision, aims and objectives
• Identify Period of Control
– e.g. 5pm to 10pm weekdays, 9pm to 6pm weekends and
9am to 10pm holidays

34. Statement of Objectives
• To maximise the use of the facilities during
Period of Control by the community
• To provide a programme of leisure time
activities after school, during school holidays
and at weekends
• To offer facilities on a casual use basis to
Community Sports Clubs and individuals

35. Obligations of LA
• To make the facilities available for use during
the Period of Control
• To provide specified services in relation to the
facilities for the defined ‘Permitted Use’
• To maintain the facilities and keep them in a
clean and tidy condition

36. Obligations of Third Party
• Managing Agent
– Employer
– Operates booking and accounting system
– Licensing (TV, public performance)
– Servicing of equipment and facilities
– Safety and security monitoring
– Cost of specified utilities (e.g. telephone)
– Additional services (catering etc)

37. Obligations of Third Party
• Community Association
– As managing agent BUT
– Establish a practical policy framework:
• For managing and operating the facilities during the
Period of Control
• In accordance with the vision, aims and objectives for
community participation in recreational activities
– s106 Town and Country Planning Act 1990
arrangement?

38. Operative Terms
• Finance
– Payment terms
– Sinking fund?
– Apportionment of costs
– Responsibility for business rates
• Monitoring and Evaluation
– Reporting and meeting requirements
– Consider joint Management Committee

39. Operative Terms
• Liability and indemnity
– Consider passing of risk
• Insurance
– Adequacy of cover (EL & PL)
• Duration and termination
– Notice periods, events of default
• Boilerplate - confidentiality, assignment etc

40. Community Use - Top Tips
• Review your asset list
• Consider gaps in the local market for leisure
and/or sports facilities and providers
• Consider appointment of managing agent or
collaboration with community association
• Settle agreement in writing and ensure you
take professional advice before proceeding

41. With every great asset...
comes a potential liability

42. Questions?
John Devine
Partner, Head of Sports Team, Muckle LLP
Email: john.devine@muckle-llp.com
Tel: 0191 211 7905