Legal Position of UK Branches

1. Since the October 1995 Council meeting legal work has been progressing towards the preparation of the necessary amendments to the Articles and Bye-Laws to enable the Affiliation option to be implemented.
2. The solicitors have drawn attention to the reference in the Articles concerning the existence of the provision which allows unincorporated associations to exist within the corporate body. These are taken to be the branches (UK and overseas) which have always had a (high) degree of autonomy to manage their own affairs/finances.
3. Consideration of the constitutional position of the UK branches has identified that certain activities are presently being conducted in breach of VAT regulations, specifically the sale of advertising in branch programme booklets and the registration fees for branch seminars.
4. The auditors advise that while social activities can remain outside of the scope of VAT, annual audit etc, business activities conducted by UK branches in the name of the Institute should be properly accounted for in future (the present audits of branch accounts are not considered to have a legal status).
5. Social activity is interpreted as being those things members of the Institute do on their own account, rather than acting for or on behalf of the corporate body - this is similar to the position of members of a Sports and Social Club of a commercial business.
6. It should also be understood that, when acting on their own account, members are deemed to be responsible for their own actions and the financial consequences of such actions and, therefore, while acting in this capacity they are not covered by the Institute’s Public Liability Insurance.
7. As the present situation is clearly not sustainable, the Policy Committee consider that essential requirements such as VAT obligations must now be properly met, but in a fashion which leaves branch activities as little changed as possible.
8. To regularise the position the auditors advise a schedule of ‘business’ activities needs to be drawn up to include advertising revenue in branch handbooks and fees from branch seminars, while the income from other events, such as dinner-dances, meetings, visits etc would be defined as being part of the branches’ ‘social’ activities.
9. Future responsibility for invoicing, credit control, payment of suppliers and VAT of branch ‘business’ activities would be transferred to Nottingham, with any profit (loss) controlled in a separate account for each branch. By this means VAT on purchases could be reclaimed by HQ for the benefit of the branches, and at the end of each financial year, the resulting profit (loss) on its business activities account would be passed back to each branch.
10. The solicitors have also advised that Council should issue a guidance note to branch committees setting out the new requirements. They also consider branch committees should keep their social funds ‘ring-fenced’ from the Institute’s business affairs by placing them in a separate bank account. Finally, they have recommended that a separate Public Liability Insurance policy be taken out to provide cover for branch ‘social’ activities.