OG55 B1 - The Landfill Tax Credit Scheme

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OPERATIONAL GUIDANCE

THE LANDFILL TAX CREDIT SCHEME

Charities and the Landfill Tax Credit Scheme

OG 55 B1 – 10 January 2005

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Contents

1. Can qualifying contributions be held on charitable trusts?
2. Amendment of objects
3. Model charitable objects
4. Other requirements for enrolment as an EB
5. Accounting
6. Notification of changes to ENTRUST
7. Amendment of administrative provision
8. Charities as contributing third parties

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1. Can qualifying contributions be held on charitable trusts?
	Qualifying contributions under the Landfill Tax Credit Scheme (LTCS) may be held on charitable trusts, which means that an organisation set up to receive payments under the scheme may be charitable provided that all its objects, including its "approved objects" are limited to those which are charitable. However, qualifying contributions can only be applied for approved objects, so if a charity also has objects which are not approved objects, the qualifying contributions will be held on special trust for those of its objects which are approved.
	New organisations may be set up specifically to receive and benefit from qualifying contributions under the LTCS. Environmental purposes are generally fourth head, and acceptable charitable objects are discussed at section 3 below.

2. Amendment of objects
	The literature produced by ENTRUST states that if an applicant for enrolment's objects clause is too general in nature, or makes no mention of works that closely match the objects in the landfill tax regulations, the organisation will need to formally amend the wording or insert a clause so that this requirement is met.
	Charities may wish to amend their objects in order to enrol with ENTRUST and benefit from the LTCS. This could range from a minor change of wording in order to comply with the requirements of ENTRUST, to the addition of a totally new object. Our policy when dealing with amendments to objects is that we should be flexible and imaginative, but any change must not represent a fundamental departure from the existing objects (unless the governing document confers on the charity an unlimited power to alter or extend the objects, in which case our authority is not required). As a general rule we would need to be satisfied that a proposed amendment was in the interests of the charity and its beneficiaries. For example, what impact would the new object have upon existing activities and funds?
	Our test for agreeing to proposed amendments to charitable companies’ objects is "no changes are made which would alter the purposes of the company in a way which is so radical that it would not reasonably have been contemplated by those who have supported the company". In cases where a cy-près scheme is necessary we must follow the law and our policy. It is unlikely that wishing to obtain LTCS funding would of itself constitute a cy-près occasion. A possible solution might be to establish a new, separate charity. See OG 1 – Orders and Schemes, and OG 47 - Alteration to governing documents: charitable companies, for further guidance.
	ENTRUST requires charities to have an appropriate object related to environmental provision in order to become eligible to receive qualifying contributions. However, to replicate the wording of the approved objects as set out in the Regulations will result in objects which are not exclusively charitable.

3. Model charitable objects

The Commission has agreed the wording of some model charitable objects which reflect the approved objects in the Regulations. ENTRUST have agreed that these will be acceptable for registration with them. Objects A – F in the left-hand column are those described in section 3 of OG 55 A1 and reflect those in the Regulations. The objects in the right hand column are the suggested corresponding charitable objects:

Object A	"[insert appropriate charitable purposes depending on proposed use of land e.g. protection of natural environment/provision of open public space or park/public recreation centre. Could have the object of promotion of urban or rural regeneration in an area of social and economic deprivation if other regeneration activities are also carried out] by restoring or reclaiming land which cannot otherwise be used for economic social or environmental purposes by reason of [pollution] [damage] caused by an activity previously carried out on the land." *
Object B	"The protection and preservation of the environment for the public benefit by: (a) preventing or reducing any potential causes of pollution in relation to any land which has suffered or may suffer pollution as a result of an activity previously carried out on the land; or (b) remedying or mitigating the effects of any pollution in relation to land which has suffered or may suffer pollution as a result of an activity previously carried out on the land.**
Object D	"The protection and preservation of the environment for the benefit of the public by: (a) the provision, maintenance or improvement of a public park, recreation ground or open space; or (b) the provision of some other public amenity.
Object DA	"The protection and preservation of the environment for the benefit of the public by the conservation or promotion of biological diversity *** through: (a) the provision, conservation, restoration or enhancement of a natural habitat; or (b) the maintenance or recovery of a species in its natural habitat.
Object E	"The protection and preservation of the environment, in particular the built environment, for the benefit of the public by the maintenance repair or restoration of any building or structure which is of historic or architectural interest or is a place of religious worship". ****
Object F	There is no model object for this. It may be capable of being charitable but this will have to be decided on a case-by-case basis and legal advice will be necessary before agreeing a charitable object.

	* In our model object we link the reclamation of land to another charitable purpose depending on the end use of the land, for example the provision of an open space. Before we could accept the object as charitable we would need to ensure that the use to which the reclaimed land would be put would be a "charitable" use; we would also need to be satisfied with regard to public benefit).
	** practice this object is very similar to the previous one but would also extend to preventative measures being taken so that pollution does not occur.
	*** "Biological diversity" has the same meaning as in the United Nations Environmental Programme Convention on Biological Diversity of 1992.
	**** The maintenance, repair or restoration of a place of religious worship will already fall within the objects of charities established for the advancement of religion. It may be the case that the maintenance etc. of a particular place of religious worship both advances religion and protects the environment. The object above will cover the maintenance, repair or restoration of a church if it is of historic, scientific or architectural interest or is a place of religious worship. The church does not have to be of historic or architectural interest if it is a place of religious worship.

4. Other requirements for enrolment as an EB
	ENTRUST have certain conditions relating to the control and management of charities applying for enrolment as EBs. The governing document must contain provisions ensuring that the organisation:
	applies its profit or income only to the objects stated in the governing document;
	must not apply its funds to the benefit of landfill operators who make qualifying contributions to it through the LTCS or to the benefit of any persons who are contributing third parties in relation to such contributions*. ENTRUST will accept evidence that a resolution has been passed that precludes the charity from using its funds for the benefit of its contributors, be they landfill operators or contributing third parties. A copy of the relevant signed minute is suitable evidence;
	has clear voting and quorum procedures for meetings of the trustee body.
	* difficulties can arise when a contributing third party has any commercial relationship with the charity e.g. supplies any goods or services to the charity. This condition means the supplier of such goods or services could not be a contributing third party.
	The organisation must not be controlled by:
	a local authority;
	a registered landfill operator or operators;
	a company or companies controlled by one or more local authorities;
	persons who have managed or controlled an EB whose enrolment was compulsorily revoked;
	persons convicted of an indictable offence;
	persons disqualified (under section 72 of the Charities Act 1993) from being charity trustees;
	persons connected with any of the above; or
	persons incapable of controlling an organisation by reason of a mental disorder.
	The organisation must not be managed by anyone:
	who controlled or was involved in managing an environmental body whose enrolment was compulsorily revoked by ENTRUST;
	convicted of an indictable offence;
	disqualified from being a charity trustee;
	connected with the previous categories of individuals; or
	who lacks capability because of a mental disorder.
	People who are involved in "management" (as described above) are those that might significantly affect an organisation and its resources and might include those who:
	sign cheques;
	appoint or dismiss people;
	buy or sell land;
	sign purchase orders or contracts;
	make or sign offers to support projects; and/or
	seek or receive money.

5. Accounting
	ENTRUST have a number of accounting requirements with regard to the receipt and use of landfill tax monies. However Entrust follows the SORP requirements and recommendations for audit or independent examination of the accounts submitted by unincorporated charities.

6. Notification of changes to ENTRUST
	A registered EB must inform ENTRUST in writing of any changes to their management and control within 7 days. This includes changes in the:
	organisation's name or address;
	corporate structure;
	governing document; or
	membership, share holders, guarantors, directors, partners or trustees.

7. Amendment of administrative provision
	Where a charity has the power to amend its governing document with regard to such matters as the composition of the trustee body, quorum and voting procedures, it should be able to use this provided that the trustees are acting reasonably and in the best interests of the charity.
	Where the charity does not have the power to amend its governing document with regard to these matters, it may be possible for us to facilitate the necessary changes either by order or by scheme where the proposed changes are expedient in the interests of the charity.
	When asked to give our consent to the type of amendments described above, we should apply the standard principles for deciding whether the proposed changes are in the interests of the charity.

8. Charities as contributing third parties
	Our view is that a charity may not normally make payments to a landfill operator by way of indemnity in relation to the proportion of a qualifying contribution which does not attract tax relief (see section 6 of OG 55 A1) unless the charity is satisfied that:
	the EB's objectives and the project on which it is to spend the qualifying contribution are charitable and within the trusts of the donor charity;
	the donor charity ensures that the payment to the landfill tax operator is conditional upon the payment of the qualifying contribution to the EB;
	the payment of the qualifying contribution to the EB is secured by appropriate contractual arrangements; and,
	the landfill operator would not have made the qualifying contribution to the EB without the payment being made by the donor charity.

Index to further related information