Glasgow Housing Association applies for charitable status to reduce corporation tax
Glasgow's £4bn stock transfer has got the go-ahead – but only after a last-minute move by the transfer landlord to avoid paying corporation tax.

Scottish first minister Jack McConnell signed off the transfer – one of Europe's largest public-sector modernisation projects – on Wednesday. Control of Glasgow council's 81,000 homes was timetabled to be formally handed over to Glasgow Housing Association by 7 March.

However, it has emerged that amid the build-up to ministerial approval GHA, which has existed for almost three years, submitted an application for charitable status to the Inland Revenue.

The application is expected to go through later this month and will allow GHA to avoid paying corporation tax on any surpluses it generates. The tax bill could have run to millions of pounds.

In a related move, GHA has also initiated plans to hive off functions incompatible with its future charitable status. It intends to set up a non-charitable subsidiary to take over its role as factor to roughly 24,000 right-to-buy homes, a service estimated to be worth a total of £150m over the coming 30 years.

A GHA spokesperson said the decision to opt for charitable status was "in line with many other housing associations". She added: "It was decided this would be the best way for GHA to deliver the range of services it will provide."

Charitable status is the best way for GHA to deliver its services

GHA spokesperson

John Brown, Glasgow council's head of marketing, said the change was understandable given the scale and complexity of this particular stock transfer process.

However, sources with experience of the stock transfer process said the timing of the decision was surprising, and that lawyers would have been aware of the options from day one.

The transfer, Britain's biggest to date, has been dogged by delays since tenants voted in favour of transfer last April.

Glasgow's transfer has been backed by £2.3bn from the Scottish Executive. Glasgow council and GHA have also spent almost £38m between them on running the transfer process.

The vast expenditure has attracted widespread criticism from MSPs and anti-transfer campaigners. Spending watchdog Audit Scotland is to examine the scheme later in the year, and the Scottish Executive is reviewing the transfer process to date.

The ups and downs of Glasgow’s road to transfer

July 2001
proposals for £4bn investment in city's council housing published by potential new landlord Glasgow Housing Association; housing to be owned by GHA but managed by local housing organisations September 2001
Scottish first minister Henry McLeish confirms that Glasgow's £900m housing debt will be paid off if transfer goes ahead April 2002
ballot result: nearly 60% of tenants who vote support transfer; council indicates transfer should happen within eight months July 2002
local housing organisations given more time to prepare for transfer after tenants complain. Tommy Sheridan MSP leads calls to have the funding arrangements for the transfer ruled invalid under European law. GHA chief executive Bob Allan goes on extended sick leave September 2002
rumours circulate about a £100m funding gap in the transfer plans; anti-transfer campaigners prepare legal challenge November 2002
council misses self-imposed November transfer deadline December 2002
news breaks of a £100m contingency fund; council approves transfer proposal January/ February 2003
GHA advertises to fill senior vacancies. To date, it has still not appointed a director of finance or chief executive February 2003
GHA applies for charitable status March 2003
first minister Jack McConnell gives approval for the transfer to go ahead

Source

Housing Today