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Railway Organisational Structures

Discussion in 'Heritage Railways & Centres in the UK' started by Monkey Magic, Sep 27, 2020.

  1. Paulthehitch

    Paulthehitch Well-Known Member

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    This is absolutely not a definitive answer in any way but I understood gift aid to be in the nature of a contribution from the direct taxation paid by the person concerned. "Zero rated V.A,T. " is more truthfully a repayment to a charity of indirect taxation paid by them. Rail fares do not attract V.A.T.
     
  2. cav1975

    cav1975 Member

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    Rail fares are zero rated for VAT which is more helpful to the business than their being exempt. Being zero rated means that input VAT can be reclaimed, if they were exempt that would not be the case.
     
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  3. Mike Birch

    Mike Birch New Member

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  4. Jamessquared

    Jamessquared Nat Pres stalwart

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    I think that guidance is quite clear that what most heritage railways provide is a service and is therefore zero rated for VAT on fares. It is the simultaneous collection of Gift Aid bit that I therefore struggle with, since my understanding of Gift Aid was that it should be for a donation, and not claimed where by definition you are receiving a service in return - that to me looks like a payment for a service.

    Clearly there is a different opinion of the matter and some railways seem to make it work - but it always feels anomalous to me.

    I should stress that I am not a lawyer - nor an accountant.

    Tom
     
  5. twr12

    twr12 Well-Known Member

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    We’ve hopefully done vat and Gift Aid to death!

    Any more structures and organisations?
     
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  6. Jamessquared

    Jamessquared Nat Pres stalwart

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    I think it is germane, since one of the impacts of different structures is that it puts you in a different position for taxation purposes (in the widest sense). So they are absolutely linked. Indeed, this thread came out of the WSR thread, and one of the stated aims of the proposed restructuring there was to devise a structure that gives better opportunity to maximise the tax reliefs that are available.

    Broadly, I think any structure needs to achieve a number of things:
    • to create a legal entity that enables you to carry out your primary objective (which is generally to operate a railway);
    • to insulate the directors and members from the financial risk of so doing;
    • to maximise the financial effectiveness of the organisation, for example through taxation benefits;
    • to concentrate strategic oversight with a known group, typically "the members"
    • to minimise the risk that a financial disaster will threaten the irreplaceable assets, i.e. to protect the value which has been built up primarily by altruistic means (donation and voluntary labour).
    Lots of ways to achieve those ends; also, it appears, quite a few ways to completely fail to achieve them.

    Tom
     
  7. Flying Phil

    Flying Phil Part of the furniture

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    I think it was around this time that David Clarke died. He had largely funded the double track and Swithland Sidings developments and guaranteed the overdraft with the bank. Suddenly the finances became dire and, although the MLST had funds, they could not readily be accessed. Bill Ford came back into a prominent position and the structure was re-organised with the DCRT being set up in 2003.
     
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  8. Vulcan Works

    Vulcan Works Member

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    Peak Rail Plc is managed by a small group of Directors nominally answerable to the shareholders. Most of the Directors including the MD have been in post for a long time and are free to do as they please. Unfortunately many of the shareholders are apathetic and because there is minimal communication by the Board many are unaware of the day to day goings on and failings. It is extremely difficult to dislodge poorly performing Directors, scrutinise the Board, challenge decisions or understand its financial (mis)dealings.

    There is the Peak Railway Association Ltd which is the supporters arm. It does some useful fundraising, maintenance tasks and the occasional ‘major’ investment in the railway’s facilities. Many members are long standing but active members and fundraising income are in a steady decline. There are some members with long friendships with Plc and PRA Directors and hence they help to protect the from any serious challenges from within the organisations.

    There is also the Derwent & Wye Valley Railway Trust which was set up to try and address the problems of the PR Plc and PRA Ltd having few tax breaks and being unable to access grant funding etc. The Trust is almost invisible and has had only modest success in attracting funding and achieving its aims. Its Directors are drawn from the same pool as the Plc and the PRA.

    The organisations work in a fashion but the structure is deeply, deeply flawed. Some Directors sit on more than one Board. In theory it allows for joined up thinking and a single sense of purpose. In reality it allows a cosy clique to control the railway and retain power without oversight or challenge. There’s an absence of fresh thinking and new ideas. Directors who have tried to change things have given up or been been driven out.

    The railway is losing money hand over fist and it hasn’t expanded in over a decade so it’s hardly a model to be envied!

    Ultimately any structure that allows the managerial team to operate without real reference to shareholders or members is a very bad structure. The ideal is to have; 1) accountable Directors who consult openly and constructively, and 2) a structure that allows members to control the strategic direction of the railway to prevent power being concentrated in the hands of a small number of incompetent / immoral people. The Teifi Valley’s near collapse is an example of what can happen.
     
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  9. Monkey Magic

    Monkey Magic Part of the furniture

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    How is the Bluebell organised and how does it differ from some of the other models outlined here?

    Do you think that people have been able to subvert the structure for their own ends? In theory, it sounds like there should be the ability to change things, but in practice the culture and the people involved make it impossible.
     
  10. 35B

    35B Nat Pres stalwart

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    Therein lies the key issue. The PR structure looks fine, but due to a combination of culture and people, it’s failing to deliver effectively. A structure is only ever a channel for people’s energies; it cannot prevent cliques, mistakes or egos, but only perhaps mitigate their effects.


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  11. ghost

    ghost Part of the furniture

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    Thanks Nick

    Keith
     
  12. Monkey Magic

    Monkey Magic Part of the furniture

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    And there is the salutary lesson not being learnt by @Lineisclear and others when it comes to reforming the WSR.

    Institutions are only as good as the people within them and if groups want to subvert them then they can. The important thing is to have mechanisms to prevent that happening.

    Where I think there is a key issue with PR is the lack accountability or effective mechanisms to remove those in office who are not doing their job.

    What we can see with the IOW is that there are clear mechanisms for giving people voice and a stake which helps, and I think the sense of agency also gives people more ownership and prevents minor issues from becoming major polarising issues.

    The culture makes the institutions work on the IOW and the institutions help to create and re-enforce a positive culture.

    Could you explain this a little more.

    What I am not clear about is what the David Clarke Railway Trust does and how it relates to the Friends of the Great Central Mainline, and then to the PLC.

    So for example, the Windcutters, or the Wagon group. How is this work funded? Are you coordinated by the Friends? How much say does the PLC have?

    Does the DCRT do all the fund raising or does it concentrate on big projects?

    How does Montsorrel fit in as well?
     
    Last edited: Sep 27, 2020
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  13. crantock

    crantock Member

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    The challenge with organisations such as Peak Rail with a large shareholding base is that it is hard to change control. Peak rail has about 700k+ shareholders but only about 3 slightly over 10k. That means it can practically be controlled for a small investment. £30k would swing it.

    Is this a problem that has been accentuated by the Charity Commission looking unfavourably upon charities, ie the membership association’s investing in and controlling the trading company?

    Even then it is hard to change control of membership orgs. The WSRA did it but only because the actions of the incumbents crossed many peoples’ red lines.

    How do you then reform a company with a wide but inactive shareholding that has been “captured” by the directors? Volunteer revolt?


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  14. Vulcan Works

    Vulcan Works Member

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    Indeed. There are some characters who dominate proceedings. A family member of the MD is employed in a key marketing / commercial role. Examine the accounts and make your own mind up about PR’s performance...

    Have people subverted the structure? Regime supporters will say that PR is a democracy and the same Directors have been voted by happy shareholders.

    Unfortunately the Board controls the limited and one sided flow of information and the communication channel to engage with shareholders. The close links with the PRA and D&WVRT undoubtedly influences their cultures too. If however PR was a premier league railway I’d be singing the praises of this arrangement!

    Under the current structure / culture, decisions made by Plc Directors cannot easily be scrutinised or challenged except by writing in or emailing (picked up by the family member mentioned above). That just leaves the 2 hour AGM. Directors who have tried to change PR have been removed by various means and PRA memberships have been blocked to prevent the threat from ‘dangerous members’. The age profile of shareholders and the fact that so many are passive also suits the regime very well. Is that subversion or is just a series of accidental coincidences?

    For the avoidance of doubt I am not a fan of the current regime...
     
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  15. estwdjhn

    estwdjhn Member

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    Foxfield has a single charitable trust which owns and operates the railway. Volunteers must be members. There is a maximum of 10 trustees / directors, three must retire and stand for election by the membership annually.

    I suspect this sort of structure is common amongst the smaller parts of the preservation scene - there comes a point when more complex structures aren't really worth the effort.

    One slightly unusual feature is that there are two classes of membership. Anyone can join and become an associate member, but you have no voting rights at the AGM, and can't stand for election to the board. To become a full member with voting rights, you must have been a associate member for over 12 months, and your application to become a full member must be approved by the board. This arrangement is I think intended to protect the (comparatively small) society from hostile infiltration attempts. In practice becoming a full member is merely a matter of time and the board's approval a formality.
     
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  16. 35B

    35B Nat Pres stalwart

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    I’d never have guessed!


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  17. Miff

    Miff Part of the furniture Friend

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    The Commission has no objection to a charity owning and controlling a trading company if it is profitable and therefore contributes to the charity.

    Examples are the IoW (as above); the K&ESR and the Welshpool. In all 3 cases the charity (which is also the membership body) owns the railway and runs the trains since preserving and operating the railway are part of the charitable aims. This kind of Charity can subsidise a loss making train service if it needs to, if it has enough income from other sources.

    All three of the above charities also own trading companies to run activities such as catering and shops - which are not part of the charitable aims but contribute to the charity's success - by gifting their profits. There can be no unresolvable tension between the charity and the trading company since, as 100% owner, the charity appoints (and could dismiss) all the trading co's directors.
     
    Last edited: Sep 28, 2020
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  18. Flying Phil

    Flying Phil Part of the furniture

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    Hi MM
    As I understand it the DCRT is a charity and acts as a funding source for its various Aims. The FoGCML are supported by the DCRT and also raise funds which go to the DCRT. Some of the PLC activities are supported by the DCRT. For instance, I believe, the DCRT owns 6990 and so will pay the PLC part of the overhaul cost.
    The DCRT own the Windcutter wagons (Which were originally paid for by the Steam Railway fund raising). There is a dedicated fund within the DCRT for those wagons. This was used to pay for the Steam Heat van and its transport for the required wheelsets. The Windcutter group has sales stands and donations which generates income which goes to the DCRT. We liaise with the PLC to get wagons to Rothley for overhaul and maintenance work. The PLC provides oil etc for running costs. The DCRT pay for steel sheet/paint/tools/etc. We have also been known to buy paint, tools etc from our own pocket to support the work. The FoGCML has ensured that the volunteers have all been PTS trained but we organise our own work, liaising with the C&W staff and PLC.
    Mountsorrel has been a very independent project, initiated and fundraised by Steve Cramp and his team. I think the DCRT has helped to fund some aspects but not a great deal.
     
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  19. 35B

    35B Nat Pres stalwart

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    I also note that for Mountsorrel, donations are routed via DCRT but focused on a restricted fund.


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  20. Jamessquared

    Jamessquared Nat Pres stalwart

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