Westway
Development Trust: (3/6) "London
property developer in nightclub
swindle"
This research document will
make little sense if you haven't read
Brian Deer's Notting
Hell from The Sunday
Times of June 17 2001. In July 2002 the
trust renamed itself Westway Development
Trust. A Westway
Development Trust index of materials is
also available
<<<go
to the start<<<
(E)
THE TRUST AVOIDED PAYMENTS DUE TO THE
COMMUNITY AND THE PUBLIC GOOD GENERALLY,
TO MR POWER'S PECUNIARY ADVANTAGE
Business
rates and fees for public entertainment
licenses are payable by the occupier of
eligible premises. These contribute to
costs to the public associated with the
premises which would otherwise fall on
the local community. In addition, as with
Council Tax, they may contribute to the
local economy and local government
services generally, including schools,
libraries etc. In the case of business
rates, a proportion is collected by the
authority on behalf of central government
as part of complex financial settlements.
NKAT
is a so-called "development
trust" and, indeed was the driving
force to found the UK-wide Development
Trusts Association. The Partnerships
Guide to Development Trusts [S12]
says:
"Development
trusts are a relatively new phenomena,
and have grown over the past 20 years
under many different influences and
inspirations. They have placed more
emphasis on economic development than
many organisations in the traditional
voluntary sector concerned with social
welfare."
In
the 1988 agreement with Mr Power [S5]
- which describes the tenant as "the
promoter" - the principle material
divergences from a standard
landlord-tenant lease, are clauses which
exempt the occupier from business rate
payments and set out provisions to deal
with the situation retrospectively if the
local authority gets on to this.
Notwithstanding
that the trust is not the occupier of the
premises, Clause 6.3 states as one of the
"trust's obligations":
"to
bear pay and discharge all rates which
now are or at any time during the
Agreement imposed or charged on the Club
or on the Trust or the Promoter or any
occupier in respect therefore PROVIDED
THAT the Trust may at any time by notice
in writing vary this Agreement by
imposing on the Promoter the obligation
to make all payments which are by this
clause imposed on the Trust including
payments arising or falling due during
the term of this Agreement but prior to
the date of any notice and such variation
shall not affect any other obligation
arising under this Agreement."
In
plain language, this suggests that the
trust accepts liability for the rates so
long as they are not paid at all. Rarely
could a contract have ever been drawn so
readily and yet crucially varied by one
party. The arrangement appears to have
been devised to extend charitable cover
to Mr Power's for-profit operations
precisely for the purpose of dodging tax.
Clause 7.2 makes the name of the game
even more clear:
"If
the Promoter receives from the relevant
authority any Notice to bring the Club
into assessment for rating purposes or to
amend or to revalue such assessment or to
bring into assessment the Club together
with any buildings or plant thereon by
whomsoever constructed then that Notice,
together with any other Notices
appertaining to rating assessments, shall
be sent forthwith to the Trust at the
Registered Offices of the Trust who may
direct the Promoter to take such
procedural action in relation thereto as
the Trust consider expedient to protect
the Trust's interests."
Clause
7.5 extends the retrospective aspect of
the above clauses in perpetuity under the
following circumstances:
"If
the Promoter shall remain in occupation
of the Club after the expiry or sooner
determination of this Agreement the terms
of this Agreement shall remain in full
force and effect..."
A
letter from the chief executive of the
local authority dated 12th October 2000 [S13]
to Pat Mason, a councillor representing
the ward in which Subterania is situated,
tabulates rate payments for the
night-club over the past decade as nil
(previous council records are apparently
incomplete):
"In
response to your enquiry, the commercial
rates account for Subterania was in the
name of North Kensington Amenity Trust
between 1st April 1990 and 31st March
2000. During this period they were
awarded a total of £57,275.25 mandatory
relief (for charities) and £14,318.80
discretionary relief as shown in the
table below. The Royal Borough would have
had to meet 80% of the cost of the
discretionary rate relief granted."
Over
approximately the same period, the trust
claimed partial wavers of the public
entertainment license fees due to the
local authority, on the same grounds. On
4th October 2000, the director of
environmental health wrote to Cllr Mason
tabulating full fees and fees paid on
behalf of the night-club [S14].
After an inquiry by council officers, the
full fee was paid from 1999. Brian Deer
has added-up the two columns of this
tabulation to produce the following
figures:
Full
fee (1991-2000):£74,382.88
Fees
paid :£27,408.26
Net
saving: :£46,974.62
More
than £19,000 of these payments made were
received in the past two years, following
investigations by council officers.
If
these figures are accurate, the trust's
charitable cover for the night-club has,
therefore, saved Mr Power, over the years
referred to in the council tabulations
alone:
Mandatory
rate relief:£57,275.25
Discretionary
relief :£14,318.80
License
waivers :£46,974.62
Total
avoided :£118,568.67
No
suggestion is made that Mr Power acted
improperly. He appears to have availed
himself of a business advantage not
apparently available to other club
owners. All would doubtless wish to do
the same.
(F)
THE AVOIDANCE OF THESE PAYMENTS WAS
UNLAWFUL
The
law on business rates exemptions for
charities is unambiguous, well-known, and
well-publicised in the voluntary sector.
The relevant statute is the Local
Government Finance Act 1988, which
superseded the General Rate Act 1967,
which contains effectively the same
provision. A standard textbook on charity
law is Tudor on Charities, (eds Jean
Warburton and Debra Morris). The 1995
edition [S15] states on page 304:
"Properties
other than dwellings occupied by a
charity are subject to non-domestic
rates. Unlike council tax, direct reliefs
are available for charities and certain
premises are exempt from the charge.
There is an automatic 80 per cent relief
from non-domestic rates on premises which
are occupied by a charity or trustees for
a charity and used wholly or mainly for
charitable purposes whether of that
charity or of that and other
charities."
On
page 305, Tudor states:
"Obviously,
if a charity owns premises and does not
occupy them - if in effect, they take the
form of an income-producing endowment and
are let accordingly - there is no
possible ground for relief (unless, of
course, the lessee happens to be an
institution which is itself a charity, in
which case relief will be available on
account of the charitable status of that
institution, not that of the lessor).
Perhaps less obviously, if a charity
remains in occupation of the premises,
but either allows them to be used by
others not being either charities or the
beneficiaries of the charity, or uses the
premises itself for purposes not directly
related to the carrying out of its
charitable objects, there will be no case
for relief."
The
position is boiled down to its basics and
distributed free of charge by the Charity
Commission for England and Wales to all
charities, their trustees and to anybody
else who asks for or collects the
relevant pamphlet from the rotating stand
in its lobby. It is also available on the
commission's website. The pamphlet is
entitled Charities and Local Authorities [S16]:
"26.
A charity has to pay only 20% of the
non-domestic rates charged on a property
by the charging authority if:
*
the property is occupied by the charity
and is used wholly or mainly for
charitable purposes or
*
the property is used wholly or mainly for
selling goods donated to the charity and
the net proceeds are applied for the
purposes of the charity."
According
to a report by the director of
environmental health for the Royal
Borough of Kensington & Chelsea's
licensing (hearings) committee on 26th
January 1999 [S17]:
"Public
entertainment licensing is governed by
the London Government Act 1963. This Act
provides a statutory exemption from the
payment of a fee on application for a
music and music and dancing license where
the license is for an entertainment
which, in the opinion of the Council, is
of an educational or other like character
or is given for a charitable or other
like purpose.
"In
a meeting of this Council's Policy and
Resources Committee on the 25th February
1986 it was agreed that the Council would
consider charging a nominal fee of £40
where the application for an
entertainment license is made by a
registered charity or other similar body
but cannot be considered to be
educational or purely for charitable
purposes. At a meeting of the Health and
Housing Committee on 26th June 1989 it
was agreed that the nominal fee for such
organisations would be raised to £90. It
was also agreed that where charities ran
entertainment premises as a commercial
operation they should pay the full fee.
Where special representation is made for
paying the reduced fee, it was agreed
that such an organisation should be
required to submit its accounts to the
Council."
In
1998, changes in administrative
procedures at the council apparently
alerted middle-management officers to the
true state of affairs with regard to
Subterania's use, which they believed was
both causing a nuisance and depriving the
community of money to which it was
entitled. They were apparently determined
to put a stop to it. The town hall is in
a different part of the borough to the
night-club and is administered, like any
large organisation, in discrete sections.
Arising from the administrative changes,
first the improper entertainment license
exemptions and then, in April 2000, the
discretionary rate relief were exposed as
unwarranted and withdrawn [S18].
The council's Conservative political
leadership, however, took no steps to
recover past sums due.
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