Policy Discussions & Decisions

The issue around the club becoming a Limited Company has been a re-occurring for a number of years now and despite much discussion and several votes has not been satisfactorily resolved. One of the main reasons for this has been that none of the current committee have the necessary skill set to conclusively answer all the questions raised.

Fortunately this situation has now changed following Jack Lythgoe being co-opted onto the committee. Jack is currently an Assurance Associate at EY, one of the largest professional services networks in the world and considered one of the big four accounting firms.

Back in August I asked Jack if he could use his professional skills to research and produce a report for the committee so that we would have a clearer understanding of both the options and implication associated with the club becoming a limited company or a charity. I also asked Jack to offer a professional opinion on each of the options.

As club secretary and on behalf of the membership I would like to thank Jack for his efforts in researching and producing two clear and very comprehensive reports on the various options available to us.

Jack’s first report giving clear and comprehensive guidance and both identifies and narrows down the options - observations/recommendations are noted in italics

Hi Chris,

I have done some looking into the options for the club on what would be best for the club.

My main three objectives have been:

• 1) Keep administrative work as low as possible. This obviously would be a major concern for yourself, Nick and Eric.

• 2) To solve the issues of the clubs assets and find a way to help recognise these as the clubs.

• 3) Keep tax as low as possible.

Since the club is an organisation that promotes the advancement of heritage and science, and would give a public benefit as it helps people run/maintain and have knowledge over the engines it would give a public benefit. This means the club would be recognised as a charity under the eyes of the law, as it should be since it is an organisation what aims isn’t to make a profit, but to help people get into OOLS.

Considering the size of the income the club receives it is likely we need to register as a charity to properly process this and show the income is exempt from taxes.

As a charity we have 4 options to register and the structure we choose:

1). A trust. This would be a trust is set up, and the trust would simply own the assets. This seems to be a good idea for the roadshow stock. However this would come at a cost unless the club knows a lawyer who could do this for us as pro bono work. Even then this would only help the roadshow assets as the principle of the trust wouldn’t really focus on the income of the loco repairs/selling and the club shop. This would then control the way the any funds could be used.

As I see it there are currently 5 divisions within in OOLS Club and each one needs to be factored in secretly and the effects on each one will be very different. I have looked at the 2023 figures as a quick bit of research.

• 1) The club website. This is key to the charity factor as it a good way to showcase OOLS to the public and help with information. However, this tends to be an expense with little income, but a lot of value to the charity. Since it value as an asset is low it wouldn’t be affected by a trust. It would be accounted for in the same way as a CIO/Charitable company/unincorporated organisation. However the latter structure offers the most flexibility to how it operates. This item would not really change no matter what structure the club chooses.
  

• 2) Loco sales. These seem to doing very well under Nigel. With a good club policy and excellent accountability it seems to be succeeding. This shows it operates best as an unincorporated organisation. Although there are some assets here these seem to be well handled and fit under a simple policy. It also helps as this inventory count tends to be low in quantity, no matter the value so is easier to account for.
  

• 3) Loco repairs. These have a high income, with no assets. Due to the fact that you, Eric and Dave are the main people who oversee these areas and so operate these at your own accord. It will operate far more smoothly and easily under an unincorporated organisation structure.
  

• 4) Club shop. This is an area which operates well at the moment. Under Nick it’s performing well, he very much knows the system and so again it works well as an unincorporated organisation. The only thing that is there is the stock is high, and a high count. This makes it harder 
  

• 5) The roadshow. As a substantial club asset, with low income and some expenses, this would be best under a trust. This would protect the assets, and show that it belongs to the club. The trust would then pick up expenses/income for the roadshow events. This then go through the trust polices what are regulated by the trustees.

2). Charitable company - this is becoming a limited company and then registering as a company. This to me possess the main issue of having a lot of admin work and legislation since the club would have to go through company law, and so can be liable for any fines/penalties for late filings or wrong doings. This will be a very major point to show Eric as this will come under his responsibilities as treasurer.

3). Charitable incorporated organisation (CIO) - This is simple. It would then keep the trustees maintaining the same roles as before, however with actual recognition of the shop stock/locos/layout as club assets. This would also mean the club would act under charity law not company law. This would also help more when it comes to who liable as the CIO would be liable not individuals.

4). Unincorporated association -this is where individuals act together on behalf of the association to keep it going. Currently this is what we use, and what you like about our format. It gives us the benefit of the flexibility we need which is particularly good for the loco sales and repairs as you, Eric, Nigel and now Dave can take up the responsibilities on these areas and run as needed. It is also good

There is also the matter of cash, as an asset it would again be best under a trust or CIO as it would recognise it more easily as the clubs. This is only gives a minor benefit, and given the current policies it would still be fine under an unincorporated organisation.

To register as a charity we will need to go to the charity commission, give details of the trustees (I would imagine these would be the committee members), give the structure of the charity, name and purpose, create a governing document which can be mostly copied and pasted from our current constitution to fit the structures shown by the charity commission. The club then shows public benefit (which is quite clear). It is then registered and the club would need to show an address, and the bank account details.

As a charity we would not be liable for income tax or capital gains tax, but we would be liable for VAT. However, we could reclaim the VAT on our expenses and costs.

A quick point for now - This shows that no matter what we decide may be best, a limited company would never be the best option. A CIO (Charitable Incorporated Organisation) gives every benefit named by those who feel that the OOLS club should become a limited company, and yet can reduce admin and the amount of legislation applicable to the OOLS club.

For now think I’d say think over the points mentioned. I’m currently working on an idea and we can discuss this further at the midsummer meet next weekend. Please do not hesitate to ask any question. There are a few other details what I need to mention before anything is done but I’ll discuss those next weekend.