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NEW DEAL FOR COMMUNITIES

Safeguarding Assets & Transfers To Successor Bodies

Introduction

The Communities and Local Government (“CLG”) policy aim in respect of safeguarding assets is to ensure that the assets that had been funded by the NDC grant continue to be used for the community and to this end will require successor bodies to satisfy them as to how the assets will be maintained and safeguarded.

The CLG has determined which types of successor bodies will be acceptable to them and these are:

• A company limited by guarantee with charitable status;
• A community interest company; or
• A community benefit society which has an asset lock in place.

Some NDCs have already created Cooperatives and Development Trusts for succession purposes but these do not in themselves constitute a legal status in which to own assets or in which to safeguard assets to the CLG’s satisfaction and therefore these organisations will still have to register as one of the acceptable bodies listed above.

The acceptable successor bodies are regulated by various authorities such as the Charity Commission, Companies House and the Financial Services Authority and accordingly these regulators have controls over the use and disposal of assets which satisfy the CLG’s requirements.

Creation of Successor Bodies

If the NDC is creating a new entity to become the successor body then this will require the transfer of assets to that new body. The objects of that new body must be consistent with those of the NDC and the CLG will look in particular at the area of benefit in this regard to ensure that the original community still receives the benefit of those assets.

A transfer of assets will encompass all commercial contracts, moveable assets and employees but the most significant transfer will be property, whether freehold or leasehold.

Clawback

Clawback may be released on the NDC assets once the final audit has been completed satisfactorily if the successor body has met all the criteria of the CLG and is one of the acceptable successor bodies. However, the CLG will determine this on a case by case basis and removal of clawback is not guaranteed.

Tax implications – transfer of property

Stamp duty land tax (SDLT) is payable on all transaction involving land where the value of land exceeds £175,000 for residential land and £150,000 for non-residential land. The SDLT is payable by the recipient being the successor body.

Capital Gains Tax (CGT) is payable by the transferor (NDC) on any profits made on the disposal of the land. An NDC it is unlikely to receive any actual payment when the land is transferred but even if this is the case, for tax purposes CGT is payable on the difference between the acquisition price and the deemed market value on the disposal.

If the successor body is a company limited by guarantee with charitable status then relief from SDLT and CGT may be available on the transfer of assets and the NDC should take specialist advice before deciding on the nature of its successor body.

For further information about anything contained in this article or legal issues affecting an NDC please contact either Helen Robinson or Rebecca Patrickson.