-
Rathbones Annual
Charity Symposiumspecial edition
Autumn 2013
Also
The Wizard of Oz and current economic policy What was the hidden
meaning of Frank Baums classic story?
Grant funding, education and research Ruth Corkin unravels the
complex VAT rules faced by charities
Unleashing philanthropy Roberta dEustachio gives us her
experiences with
Dame Stephanie Shirley and promoting philanthropy
RathbonesCharityReview
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My 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 canaps 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
Welcometo the autumn Charity Review 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 childrens 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 dEustachio, 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
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.
Welcome
2 Rathbones Charity Review
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In this issue
4-11 Rathbones Annual Charity Symposium A special review of this
years event at the Royal Opera House.
12-15 The Wizard of Oz and current economic policy What was the
hidden meaning of Frank Baums classic story?
16-19 Grant funding, education and research Ruth Corkin unravels
the complex VAT rules faced by charities.
20-22 An interview with Francis Salway Chairman of the London
Community Foundation.
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.
30-31 Unleashing philanthropy via ambassadors and Giving
magazine Roberta dEustachio tells us about her experiences with
Dame Stephanie Shirley and promoting philanthropy.
Guest editor James Brennan
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.
James can be contacted at:[email protected]
Follow us on Twitter: @Rathbones1742
In this issue
Rathbones Charity Review 3
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RathbonesAnnual CharitySymposium2013
Rathbones Annual Charity Symposium 2013
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This years 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
Rathbones Annual Charity Symposium 2013
Rathbones Charity Review 5
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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.
The 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.
The art of stock
selectionPanel
discussion
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Alex Dow Investment Director ICAP
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.
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 groups 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 groups 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.
Adrian Maxwell Investment Director Booker Group
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.
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 StreetMiddle right: Alex Dow
Bottom right: Adrian Maxwell
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The 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.
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
Julian RathboneInvestment Director
Global energy: a seismic shift?
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There 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.
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 Commissions 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.
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.
William ShawcrossChairman of the Charity
Commission
Collectivism, philanthropyand life today
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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 charitys 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 winners 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.
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In 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
charitys first corporate sponsor.
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
multi-faceted, doing as many as 200-300 events per week.
The charitys 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 soldiers
life. These are young men and women, perhaps as young as 20 when
they are injured, often with poor education and from areas of
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.
Bryn ParryCo-founder of
Help for Heroes
Rathbones Charity Review 11
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The Wizard of Oz and current
economic policy
by Alex Dow
Investment Director
Rathbone Investment Management
The Wizard of Oz and current economic policy
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The original childrens 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
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.
1Macroeconimcs (2nd edition) by N. Gregory Mankiw
The Wizard of Oz and current economic policy
Rathbones Charity Review 13
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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.
The man behind the iron curtainIn 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.
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.
2Macroeconomics (2nd edition) by N. Gregory Mankiw
You shall not press down upon the brow of labour this crown
of thorns, you shall not crucify mankind upon a cross of
gold.
William Jennings Bryan
William Jennings Bryan, Democratic presidential candidate 1896
and 1900.
Imag
e: L
ibra
ry o
f C
ongr
ess
1996
, Geo
. H. V
an N
orm
an
14 Rathbones Charity Review
The Wizard of Oz and current economic policy
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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.
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
[email protected]
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
President William McKinley defeated William Jennings Bryan in
two consecutive elections.
Imag
e: C
ourt
ney
Art
Stu
dio
1896
Rathbones Charity Review 15
The Wizard of Oz and current economic policy
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by Ruth Corkin
VAT Senior Manager James Cowper
Grant funding, education and research
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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.
The 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.
Grant fundingWhat 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.
It has never been more difficult to determine the VAT treatment
of supplies
made in the not-for-profit sector.
Grant funding, education and research
Rathbones Charity Review 17
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Obviously, from a charitys 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 HMRCs Charities
Unit is to be inundated with requests for clarification.
Case studies
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 Hopes 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.
Grant funding, education and research
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EducationThe 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.
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.
ResearchThe 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.
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.
Ruth Corkin is VAT senior manager at James Cowper and
specialises in charities and education.
She can be contacted at [email protected] or on 01865
861166.
Grant funding, education and research
Rathbones Charity Review 19
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An interview with
Francis SalwayChairman of the London Community Foundation
An interview with Francis Salway
20 Rathbones Charity Review
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How 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. Thats 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. Im an ardent
believer in community foundations and thats 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 theres 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.
An interview with Francis Salway
Rathbones Charity Review 21
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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.
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 donors, I think the ability to get
involved as a family with your husband or wife or, if you leave a
legacy, through your children is also very appealing.
Why are community foundations successful?There was a feature in
the Evening Standard about the Dispossessed Fund. It featured
somebody who had suffered domestic abuse and decided to help other
people in similar circumstances. She then began to get involved
with young people on an estate. She helped them to get more
training, built their confidence to apply for apprenticeships and
then into full-time employment.
Helping such projects is exactly the sort of thing that
community foundations do incredibly well because wealthy
individuals or companies often wouldnt know where to start to
access an individual or group like this nor how to distinguish
between the groups which are effective and those which are not.
In my experience, small charities often have an incredibly
entrepreneurial feel because, just like those who start small
businesses, the people that run these small charities are driven by
a passion. Theyre lean, fast-moving and effective. They may have a
different primary objective, but the same wonderful attributes
around making things happen are so evident.
I believe wholeheartedly in the work of community
foundations and the opportunity to be part of
the movement in London is one I simply couldnt miss. I hope that
more and more Londoners will join us as
we strive to build a stronger and fairer future for our
communities.
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 youve effectively got very
close to a two-for-one offer for higher rate tax payers.
Thats quite an unusual offer its a once-in-a-lifetime
opportunity to do something for the long-term. In
London, nearly 4 million has been put aside for matching and it
needs to be used. But its not just London: there are over 50
community foundations, covering virtually every area of the UK.
How do you generate money to give an immediate boost to a
project, yet hold some back for the longer term?The way my wife and
I have done it is simply giving from income, as we take a very
long- term perspective. But donors can also give a certain
amount by way of endowment and ask the community foundation to
use the Gift Aid earned for immediate giving. Or they can create a
fund that is endowed and top that up annually. Both make an
immediate impact, backed up by long-term support.
What are the levels required to create your own, bespoke fund?It
varies between community foundations. In London, for immediate
giving the level is 25,000 and for endowments its 50,000 to have
your own fund, named and under your direction.
For further information on the London Community Foundation
please visit www.londoncf.org.uk
An interview with Francis Salway
22 Rathbones Charity Review
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Charitable incorporated organisations
A new wayby 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
Rathbones Charity Review 23
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To bridge the gap (or stand neatly within it if you prefer) is a
new Charity Commission- sponsored entity known as the charitable
incorporated organisation (CIO).
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 CIOs 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?
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
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.
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.
CIOs have the key advantage of limiting the trustees personal
liability without having to be registered and subject to Companies
House.
Charitable incorporated organisations A new way
24 Rathbones Charity Review
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Kevin Custis is a director of Rathbone Trust Company
and can be contacted at [email protected]
Upcomingevents
Charity Times award ceremony 2013
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.
For more information on the event, please see
www.charitytimes.com/awards
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.
To register for more information, please contact Francesca Monti
at [email protected]
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
The argument not to change is as much about the process of
changing anything to do with a charitys constitution. For
example:
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.
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 CIOs 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.
Apart from being subject to company law (not often a positive)
full blown companies can borrow money more easily with limited
liability remaining.
Upcoming events
Rathbones Charity Review 25
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Enduring values in
changing times
by Julian Rathbone
Investment DirectorRathbone Investment Management
Enduring values in changing times
26 Rathbones Charity Review
-
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 employees 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 firms
ship captains.
Julian Rathbone is an investment director at Rathbones and can
be contacted at
[email protected]
Enduring values in changing times
Rathbones Charity Review 27
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1742 Originally founded as timber
and shipping merchants in Liverpool in 1742; by
World War I Rathbones was managing investments for wealthy
private investors.
1788Liverpool branch of the
Society for the Abolition of the African Slave Trade is
founded William Rathbone III is a founding member.
1988Comprehensive Financial
Services merges with Rathbone Bros & Co
and becomes Rathbone Brothers Plc.
1992Admitted to the
London Stock Exchange full listing.
1996Acquisition of
Neilson Cobbold.
2004Formation of specialist ethical investment unit Rathbone
Greenbank
Investments.
2006Acquisition of Dexias UK private banking business.
2008Acquisition of Citywall Financial Management
in Exeter.
2009Acquisition of a number
of private client portfolios from Lloyds Banking
Group and the entry into an exclusive client referral and
distribution agreement.
But it was William IIIs 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.
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.
Enduring values in changing times
28 Rathbones Charity Review
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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.
Enduring values in changing times
Rathbones Charity Review 29
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Dame Stephanie Shirley speaking at the 2010 Rathbones Annual
Charity
Symposium at The Royal Society.
Unleashing philanthropy
via ambassadors and Giving magazine
The philanthropist
voice worldwide
by Roberta dEustachio
Co-founderAmbassadors for Philanthropy
The philanthropist voice worldwide
30 Rathbones Charity Review
-
Dame 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.
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 dont 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
The best way to start is to tell you about my experience serving
as chief of staff to Dame Stephanie Shirley, the governments
founding ambassador for philanthropy from 2009-2010 and how that
appointment inspired us to found the Ambassadors for
Philanthropy charity.
The charitys aims are to inspire countries worldwide to appoint
their
own ambassadors as well as to give philanthropists a voice.
The philanthropist voice worldwide
Rathbones Charity Review 31
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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
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management systems, the international ISO 14001 standard, EMAS
(Eco-Management & Audit Scheme) and the IPPC (Integrated
Pollution Prevention and Control) regulation. All rights
reserved.
Important information
and are registered trademarks of Rathbone Brothers Plc.
Contact us
If you would like further information or to arrange an initial
meeting, please call Francesca Monti on 020 7399 0119 or email
[email protected]
Head ofce1 Curzon Street, London W1J 5FB
Tel. 020 7399 [email protected]
www.rathbones.com
We also have offices at the following locations:
Aberdeen Tel. 01224 218 180
www.rathbones.com/office/aberdeenBirmingham Tel. 0121 233 2626
www.rathbones.com/office/birminghamBristol Tel. 0117 929 1919
www.rathbones.com/office/bristolCambridge Tel. 01223 229 229
www.rathbones.com/office/cambridgeChichester Tel. 01243 775 373
www.rathbones.com/office/chichesterEdinburgh Tel. 0131 550 1350
www.rathbones.com/office/edinburghExeter Tel. 01392 201 000
www.rathbones.com/office/exeterKendal Tel. 01539 561 457
www.rathbones.com/office/kendalLiverpool Tel. 0151 236 6666
www.rathbones.com/office/liverpoolLymington Tel. 01590 647 657
www.rathbones.com/office/lymingtonNewcastle Tel. 0191 255 1440
www.rathbones.com/office/newcastleWinchester Tel. 01962 857 000
www.rathbones.com/office/winchester
For ethical investment services:
Rathbone Greenbank InvestmentsTel. 0117 930 3000
www.rathbonegreenbank.com
For offshore investment management services:
Rathbone Investment Management International*Tel. 01534 740 500
www.rathboneimi.com