Development of an operating structure and business model

An independent school wished to construct a sports facility for the benefit of the School and the local community.
 
The activity would hopefully generate additional revenue and demonstrate public benefit. It was therefore necessary to develop an operating structure and a business model which was the most beneficial for a dual-use facility.
 
The School Governors needed to consider a variety of issues, including charity law, Corporation Tax, VAT, business rates relief and stamp duty land tax.
 
The School's primary purpose is to provide education rather than leisure facilities to the community. In some cases it is possible for a charitable school to provide services directly to the community in accordance with its governing document. But, the view was taken that the non-school activity would potentially be significant and the turnover would exceed the Corporation Tax threshold relating to incidental trading activities undertaken by a charity.
 
It was decided to utilise a separate trading company to manage the facility 'SportsCo' which would operate at arms length from the School. Alternative business models were then set out for the Governors to consider.
 
Following our ongoing advice and discussions the School pursued a model whereby SportCo built the facility and hires it to both the School and the community. It was decided that SportsCo should itself apply for charitable status on the basis of the recreational facilities it provided to the community.
 
This model produced VAT benefits, removed exposure to Corporation Tax, prevented loss of business rates relief and mitigated stamp duty land tax.