New structure for the ECF

[Matt Harrison]

For Gift Aid eligibility, if membership is set at £12, then the value of benefits received by members must be less than 25% (£3). If the value of benefits (grading plus ?) exceed £3 then the membership could be split into two elements, the payment for the benefit and a separate donation. But the donation must then be optional. In this case I doubt that the Gift Aid would outweigh the numbers who declined to make a donation.

So is grading worth more or less than £3 a year to a member of the ECF, when for many people it's the only benefit they see?

[Roger de Coverly]

So is grading worth more or less than £3 a year to a member of the ECF, when for many people it's the only benefit they see?

Most of the ECF's costs relate to the Office in Battle and other support costs for running the ECF. It's been claimed that all these costs are incurred in the broader interests of English chess and that it's correct to apportion them by head regardless of an individual's chess interest or activity. So is all or some of the Battle office a benefit of membership?

[Andrew Farthing]

Speaking as a charitable company secretary and finance director for the last 15 years, the move to charity status seems moderately irrelevant to me. It's not clear to me that the financial benefits outweight the costs and resultant increase in regulatory responsibilities. Charities are certainly not exempt from VAT for example. There are some areas where income can be exempted from VAT, but having non-business income can actually make the situation worse - irrecoverable VAT is one of the biggest bugbears of charity finance. The net benefit from charity status is thus less than the potential reduction in VAT paid on income as a smaller proportion of input VAT can be recovered. So the cost-benefit assessment would depend upon the VAT profile of the organisation.

I don't see that there is a clear benefit from charitable registration. The additional complexity of a group structure with a commercial trading company to handle the non-charitable elements seem to me to potentially outweigh the benefits. And given the cost (in volunteer time - the ECFs most valuable asset) of the current debates about membership, is it wise to invest what is clearly a scarce resource in such issues?

And charity registration doesn't remove the need for company governance. Most registered charities are also companies listed by guarantee. The alternative would be an unincorporated charitable trust. This would be very inappropriate for an organisation of this size as directors could be personally liable for debts. So the company structure for the ECF (whether non-charitable or charitable) is essential.

Charity Commission do advise on smaller boards, but 15 would be acceptable - my charity has 10 for example but with the powers to vary between 5 and 15.

There are a couple of misunderstandings here.

I'm not expecting a VAT benefit from charitable status per se. The potential financial benefits for the charity take the form of the possibility of Gift Aid eligibility for membership subscriptions and any donations, plus the likelihood - in my view - that it will be easier to raise funds (donations, sponsorship and legacies) as a charity. Our latest advice is that there is a strong possibility that membership subscriptions will be acceptable for Gift Aid purposes, but this cannot be guaranteed.

The potential for a VAT saving previously mentioned in this connection relates to the possibility that the non-charitable body would drop below the £73K VAT threshold. This would of course depend upon HMRC's acceptance that the two bodies were genuinely separate and that the split had not been simply a tax avoidance measure. Our initial advice is that this should be OK, but this needs to be tested.

The reference to "a group structure with a commercial trading company to handle the non-charitable elements" suggests a possible misunderstanding of what's intended. The two organisations would be separate, not part of a group. This is necessary in order to achieve charitable status for the one (because its aims must be exclusively charitable) and the possibility of the tax advantages previously mentioned for the other.

Organisationally, the split presents an opportunity to rethink the constitutions of the two bodies from scratch, which may well result in something much simpler for both. (I'd certainly like this to be the case.) I would imagine that both organisations would be companies limited by guarantee; I'm not attracted at all to the notion of an unincorporated charitable trust for the reasons cited in the post quoted above.

The point about volunteer time is a fair one, but in practice it's mostly my time - and I'm increasing the time I give to the ECF while this is ongoing - and the time of individuals who, with one exception, are only involved in this specific issue, so there is no adverse impact on other activities.

[Paul Cooksey]

Thanks Andrew.

Do we have clarity about which functions would be in which organisation yet? Do we know how we would split the office resource between these functions, assuming that is necessary?

[Andrew Farthing]

Do we have clarity about which functions would be in which organisation yet? Do we know how we would split the office resource between these functions, assuming that is necessary?

Nothing definite, except that International Chess and the main British Championship have to be outside the charity. My current expectation is that the British Championships as a whole would be run by the non-charity, because this gives more flexibility with regard to funding the non-charity.

The issue of administrative support is still to be finalised.

[Roger de Coverly]

The issue of administrative support is still to be finalised.

So for that matter is the membership of the respective bodies. Is the "international" ECF to continue to insist that all English players taking part in internationally rated events should be members of the ECF's membership scheme for individuals and at a £ 27 per head cost? If so, then an appreciable number of players who would regard themselves as amateur and events that would be regarded in the same way will be swept into the "professional" body.

Against that, there is no obvious reason why a County Association should want or need to be a member of the internationally recognised body. Perhaps the professional body tries to maintain a monopoly on grading services and earns income that way. To the extent that grading services are partly financed by the volunteer effort of local graders, that doesn't fit very well either.

[Matt Harrison]

Andrew Farthings point are well made. If there is scope to get the entire membership fee Gift Aid eligible and a significant potential for legacies, then those are very clear benefits. The VAT threshold issue is surely only a short-term benefit - any expansion of the ECF is likely to make this a moot point in time. Again, it is necessary to consider the input VAT threshold as well - an organisation below the VAT threshold cannot reclaim any input VAT.

[Andrew Farthing]

The VAT threshold issue is surely only a short-term benefit - any expansion of the ECF is likely to make this a moot point in time.

That's possible. However, it would depend on whether future expansion happened in the charity - in which case it wouldn't affect this aspect - or in the non-charity (or both).

[David Robertson]

Since the British Championship is one major element of the 'non-charitable' wing of ECF, why not out-source it? I speak idly because I don't know if a market exists into which a contract might be let. But some market-testing might be in order. What would, say, Chess Ltd, or e2.e4.org, or some other entrepreneur want for running the Championships to an appropriate standard and specification? My point being that, if ECF can shed its non-charitable functions, it can focus on its charitable activities. Of course this begs the question of what constitutes ECF's 'core business'.

[Paul Cooksey]

What would, say, Chess Ltd, or e2.e4.org, or some other entrepreneur want for running the Championships to an appropriate standard and specification?

Or in an ideal world, what would they pay? I like the idea of inviting bids for services (British, Grading, Yearbook, anything else) even if no suitable vendor is found. It allocates costs to these activities more clearly.

[David Robertson]

"What would they pay?" indeed. But I had in mind that, initially at least, the market could be tested in terms of what discretion or control an entrepreneur would want. Put another way: if a professional Event Management firm were to tender, they'd probably want to run things differently.

In my opinion - and clearly in the opinion of some others on earlier threads - the British Championships could do with a makeover. The 100th Championships in 2013 could be the occasion for a fresh start. I'm aware that certain Arbiters & soi disant Tournament Directors would sooner disembowel themselves than change anything. Entrepreneurs may not be so hidebound. A contract could be drawn up that allows appropriate scope for change, while honouring a century's traditions in a sensible manner. But first, the ECF Board has to decide whether it wants to remain a struggling amateur in the field of event management; or whether it is open to alternatives.

On other services, many are already out-sourced (website; online access to games; coaching juniors; grading; etc). But of course, these are out-sourced to unpaid volunteers - for which we must be hugely grateful. It's not very satisfactory though.

[Sean Hewitt]

What would, say, Chess Ltd, or e2.e4.org, or some other entrepreneur want for running the Championships to an appropriate standard and specification?

Or in an ideal world, what would they pay? I like the idea of inviting bids for services (British, Grading, Yearbook, anything else) even if no suitable vendor is found. It allocates costs to these activities more clearly.

That would depend on the terms of the tender ; i.e. what we were free to control and change and what we could not.

Of course, we did exactly that this year when we ran the Irish Championships on behalf of the Irish Chess Union . Rather successfully, by all accounts

[Mick Norris]

Since the British Championship is one major element of the 'non-charitable' wing of ECF, why not out-source it? I speak idly because I don't know if a market exists into which a contract might be let. But some market-testing might be in order. What would, say, Chess Ltd, or e2.e4.org, or some other entrepreneur want for running the Championships to an appropriate standard and specification? My point being that, if ECF can shed its non-charitable functions, it can focus on its charitable activities. Of course this begs the question of what constitutes ECF's 'core business'.

(Another) good idea

Manchester has done the same (albeit accidentally) with our Rapidplay - I think that passing on to someone else the financial risk can make sense, and as our aim is to provide opportunities to play chess in Greater Manchester, it fits the bill - we put volunteer time in, and use our equipment

[Christopher Kreuzer]

What would, say, Chess Ltd, or e2.e4.org, or some other entrepreneur want for running the Championships to an appropriate standard and specification?

Or in an ideal world, what would they pay? I like the idea of inviting bids for services (British, Grading, Yearbook, anything else) even if no suitable vendor is found. It allocates costs to these activities more clearly.

That would depend on the terms of the tender ; i.e. what we were free to control and change and what we could not.

Of course, we did exactly that this year when we ran the Irish Championships on behalf of the Irish Chess Union . Rather successfully, by all accounts

How does the Irish Championships compare in size to the British Chess Championships? One of the logical questions if anything was put out to tender (and I don't think this should happen, actually) would be asking what the largest event was that the applicants had run. Having said that, I suspect that once you have the organisational skills, the key points are being able to look for, find, and successfully negotiate with a suitable venue. Once you have that, it is relatively easy to do the work needed to make everything else fall into place.

[E Michael White]

Since the British Championship is one major element of the 'non-charitable' wing of ECF, why not out-source it? I speak idly because I don't know if a market exists into which a contract might be let. But some market-testing might be in order. What would, say, Chess Ltd, or e2.e4.org, or some other entrepreneur want for running the Championships to an appropriate standard and specification? My point being that, if ECF can shed its non-charitable functions, it can focus on its charitable activities. Of course this begs the question of what constitutes ECF's 'core business'.

(Another) good idea

Nothing definite, except that International Chess and the main British Championship have to be outside the charity. My current expectation is that the British Championships as a whole would be run by the non-charity, because this gives more flexibility with regard to funding the non-charity.

Andrew F - I dont buy any of this.

I believe that the British Championships could be run as a fund raising event/exhibition within a charitable ECF. The main restriction would be appearance fees/prizes for professionals would have to be raised externally but isnt that what J Robinson really provided his funds for in the absence of sponsors ? if it were run in this way there are many tax exemptions available. Splitting the entry fee into premises admission and entry fee for an event might also open the possibility for the admission fee to be gift aided for members.

Our latest advice is that there is a strong possibility that membership subscriptions will be acceptable for Gift Aid purposes, but this cannot be guaranteed.

This bit is green shoots of progress; good to see the ECF charity experts getting there if slowly.

Oh bother Nigel Short has just posted; nobody will read this one now. Hello Nigel.