Trustees disqualified for sending wrong message over £17m business rates

Two trustees of a charity set up to broadcast public service messages have been disqualified by the Charity Commission for misconduct, which resulted in the charity owing £17m in business rates

Public Safety Charitable Trust (PSCT) was set up to broadcast public service messages to communities via bluetooth equipment situated close to shopping centres in towns and cities across the country, and claimed to have broadcast to approximately two million people.

The charity took out leases on empty properties and placed equipment in them to broadcast information about crime in the area.

Businesses received a reduction in their business rates for leasing properties to a charity, and in return paid a donation to PSCT.

When the regulator’s inquiry opened, the charity held approximately 2,000 leases for properties in 240 local authorities. The charity then claimed the 80% mandatory charity relief on the business rates levied on the properties, and in most cases the further 20% discretionary relief.

The Commission first engaged with the charity in October 2011 after concerns regarding business rates relief claimed by the charity were raised by several local authorities that subsequently took the charity to court.

The matter eventually came to the Court of Appeal in May 2013, which found solely operating bluetooth transmitters in premises was not sufficient for charitable purposes.

As a result of this judgement, the charity became liable for approximately £17m in business rates on the premises it leased.

The Commission opened a statutory inquiry at the time, but this was placed on hold after a compulsory liquidation petition was issued by the Insolvency Service and the charity began to be wound up in July 2013.

The Commission’s inquiry found the trustees contracted with Commercial Link Ltd (CL) as the sole provider of the bluetooth technology, equipment and services to the charity, and the company had control over the charity’s records and administration – to the exclusion of the trustees.

The inquiry also found the trustees could not show they had acted in the charity’s interests in leasing properties and subjecting the charity to the risks of financial loss for business rates.

The framework agreement between the charity and CL appeared to be very much in favour of CL, in that 95% of the money received by the charity from the landlords for the leasing of the properties went to CL and the remaining 5% went to the charity.

The trustees explained that the framework agreement did not appear to cover the whole arrangement between CL and the charity, such as the agreement that CL would pay the liability for any business rates. In the inquiry’s view it would have been very difficult for the charity to enforce such an agreement if it was not set out in the written framework agreement.

The trustees claimed to have taken adequate legal advice, although as part of the agreement with CL the charity retained responsibility for any liabilities and the trustees did not show any evidence as to how they mitigated for this risk.

Following the Commission’s findings, two trustees have been disqualified. Mark Ferguson was disqualified for nine years and Christine Sutton for five years, from acting as company directors by the Insolvency Service, as a consequence, from being trustees or holding a senior position at a charity, for their conduct in this matter.

Amy Spiller, head of the investigations team at the Charity Commission, said: ‘Being a charity is meaningful - we expect trustees to be accountable and demonstrate their worth to the public and donors.

‘The trustees of PSCT could not show this, instead they undermined the meaning of charity by enabling businesses to avoid paying business rates, resulting in the charity taking on huge liabilities they could not afford and consequently costing the charity’s future.

‘It’s right that trustees have been disqualified and the charity will be removed from the register.’

Charity Inquiry: The Public Safety Charitable Trust Ltd

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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