Keep it legal: Sharing facilities

Charities are increasingly being encouraged to collaborate and share their facilities to cut overheads, and Acevo chief executive Stephen Bubb is the latest to make the call (Third Sector, 16 June), writes Rachel Holmes, professional support lawyer at Farrer & Co.

But trustees need to consider several issues before they decide to share their charities' facilities.

First, there must be an appropriate power in the charity's constitution to enter into this type of arrangement. If there is, trustees need to consider whether sharing is in the charity's best interests. What are the potential benefits and disadvantages of the arrangement? Are there any legal constraints on the charity, such as restrictions in a lease? Will the charity be treated as conducting non-charitable trading? Will the arrangement affect eligibility for rating relief?

Boards must then decide how much to charge the other organisation. Charities can use their funds only to further their charitable purposes, so they cannot subsidise any organisation they share facilities with - unless it has the same charitable purposes. Ideally, a full market rate should be charged, although trustees should be aware that this could have tax implications if the charity is providing services as well as office space, because this will be seen as a form of non-charitable trading.

In some circumstances, it might actually be in the best interests of the charity to charge less than a market rate - for example, if a charity occupies premises that are too large, but into which it wants to grow.

In this situation, it will want to share facilities for a limited period only, so it might be unable to find anyone who is willing to pay a market rate.

Similarly, a charity based in a remote location could find that having an on-site cafeteria helps to recruit and retain staff, so sharing its premises with a catering firm for less than the market rate becomes desirable.

In cases such as these, trustees will need to be clear about the justifications for the arrangements and check that those justifications continue to be valid.

Sharing arrangements should be accurately recorded in writing. An unambiguous agreement will help things run smoothly and make it easier to deal with any difficulties that arise.

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