Why local authorities need to tread carefully when funding charities

A Charity Commission intervention and a recent VAT tribunal case highlight the need for local authorities to consider their legal position carefully when giving funding to charities.

On 25 February 2014, the Charity Commission published an operational compliance report into Fairfield (Croydon). It decided to investigate after reports in local news blogs suggested that Croydon Council was trying to take over the charity. The charity maintains and manages Fairfield Halls, an
entertainment venue in Croydon. The council owns Fairfield Halls but leases it to the charity. It then gives the charity a grant that covers the cost of the rent.

It turned out that Croydon Council was planning to invest significant funds in refurbishing Fairfield Halls and wanted to make sure that its funding would be used to the best effect. The council had therefore suggested that it be admitted as a member of the charity and given a 75 per cent voting right at member meetings, thereby effectively turning the charity into a local-authority-controlled company…

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