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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