STRATEGY, STUDENTS AND GOVERNANCE

Charities Act 2006 (England & Wales) - update on implementation

Since our November edition, details of the implementation of the new provisions have been published.  It will be staged over 2007 and 2008 with the provisions relating to exempt charities (i.e. universities and student's unions) not expected to come into force before 2008.  Read more

FINANCE, TECHNOLOGY AND IP

VAT tribunal decision on University's VAT recovery method

Yet another unfavourable VAT decision against a university has just been published.  This case concerned the University's "partial exemption" method, under which it is able to recover a proportion of the VAT it has paid on supplies of goods and services.  The case will make it more difficult to justify a "special method" for maximising input tax recovery by isolating a particular facility with a high level of taxable use.   Read more

ESTATE

The EU energy efficiency action plan

Our article reviews the new EU Energy Efficiency Action Plan and summarises the key implications for universities.  Read more

HUMAN RESOURCES

Blog off! – tackling the risks of blogging

Our article highlights the various risks associated with "blogging" by members of staff and offers some suggestions to reduce those risks through effective policies, and deal with breaches of policy in a way which does not oxygenate the original offence with further free publicity.  Read more

FULL ARTICLES

STRATEGY, STUDENTS AND GOVERNANCE

Charities Act 2006 (England and Wales) - update on implementation

In the November briefing we set out the key changes being brought in by the Charities Act 2006.  Since then, details of the implementation of the provisions have been published.  The implementation is to be a staged process over 2007 and 2008.  In particular, certain provisions require further consultation or secondary legislation before they can be commenced.

We have set out below details of the proposed timetable of implementation of the key provisions.

Early 2007:

• The new Charity Commission, its objectives, functions, duties and some of its powers.
• The requirement for the Commission to develop guidance and consult on the public benefit test.
• Changes to the restrictions on mortgages of charity land.
• Waiver of trustee's disqualification and the power for the Commission to relieve trustees and auditors from liability for breach of trust or duty.

Late 2007:

• Provisions relating to mergers of charities.
• Provisions relating to audit and accounting for charities.

Early 2008:

• The new definition of charity and the public benefit requirement.
• The Charity Tribunal.
• New powers for the Charity Commission.
• Remuneration of trustees providing services to a charity.
• The new form of charitable organisation – the Charitable Incorporated Organisation.

Exempt charties:

Provisions relating to exempt charities are not expected to come into force before 2008. The reason for the delay is to enable those charities, their principal regulator and the Charity Commission time to prepare for the changes.

Also, in 2007, a plain English guide to the Charities Act is to be published and there is also to be a series of regional events to explain the Act to charities in England and Wales.  Go back

janet.hoskin@pinsentmasons.com

carole.elder@pinsentmasons.com

FINANCE, TECHNOLOGY AND IP

VAT tribunal decision on university's VAT recovery method

In a decision reached in September 2002 but only published in December 2006, a VAT Tribunal has ruled against the University of Glasgow. The case concerned the University's "partial exemption" method, under which it is able to recover a proportion of the VAT it has paid on supplies of goods and services.  The University had sought to apply a special partial exemption method to a particular sports complex owned and operated by it, but this was rejected by HM Revenue & Customs and the VAT Tribunal as not providing a "fair and reasonable" apportionment.   This article applies throughout the UK.

Background

The University of Glasgow makes both exempt (predominantly education and ancillary services) and standard rated supplies for VAT purposes.  To the extent that input VAT charged to the University on supplies of goods and services is attributable directly to the University's taxable supplies, input VAT recovery may be made in full.  Conversely, to the extent that input VAT is attributable to exempt supplies, that input VAT is an irrecoverable cost to the University.  This case concerned the University's partial exemption method, which is used to determine the rate of VAT recovery on the remainder of a taxpayer's input tax, i.e. that which is not directly attributable to either non-taxable or taxable supplies.

The standard method of partial exemption provides for recovery of this "unattributed" input tax according to the turnover of the taxpayer, ie the greater the proportion of overall turnover that is taxable (as opposed to exempt / non-taxable), the greater the proportion of unattributed input tax that can be recovered.  Taxpayers can agree with HM Revenue & Customs a "special method" to override the standard method where the taxpayer thinks that this will give a fairer result and HM Revenue & Customs agree to the use of the special method. 

Facts

The University had an existing special method for attributing input tax, and sought to amend this special method by accounting separately for its Garscube facilities. Garscube was a large sports complex owned by the University, which had significant commercial (ie taxable) use (for example football pitches were let out to clubs such as Arsenal, Leeds, Celtic and Rangers). The University also operated other sports facilities, which were used mainly for making exempt supplies to students. 

HM Revenue & Customs refused to allow the change to the University's special method on the basis that it would not have produced a fair and reasonable apportionment.  The proposed variation sought by the University related solely to Garscube, which was only one of several recreational facilities operated by the University.  It was the view of HM Revenue & Customs that to be acceptable the method should take into account all of the University's sports facilities and not just Garscube.

The decision 

The VAT Tribunal agreed with HM Revenue & Customs, and held that it was neither fair nor reasonable to "cherry-pick" a specific sports facility as being the place where input tax recovery might be made to obtain that benefit, while ignoring the University's general activities within that sector. The provision of sporting facilities by the University had to be looked at as a University-wide activity.

As a result of this decision, it may be more difficult for universities and other educational establishments to justify proposing a special method for maximising input tax recovery where the university seeks to distinguish a particular location or facility with a high level of taxable use, if other facilities in the same sector are also operated with mainly exempt use. HM Revenue & Customs are likely to treat all activities within any one sector as one indivisible part of a taxpayer's business.  Go back

jon.robinson@pinsentmasons.com

ESTATE

The EU energy efficiency action plan

The EU Energy Efficiency Action Plan was published on the 19 October 2006, and will be introduced in phases over the next six years. It is a response to the growing need to counter the challenge of climate change, the requirements of the Kyoto Protocol and the growing dependency on fossil fuels imported into the EU.  This article is relevant throughout the UK.

The Plan sets an ambitious target of reducing energy consumption by 20% across the EU by 2020. To achieve this it has been recognised that the general public, companies and members of the EU will have to adapt their energy use and become more efficient. The policy is to make better use of energy; not to reduce the use of plant and equipment.

Energy efficiency is not solely a matter for governments or the EU to be concerned about; it requires commitment from individuals and companies to implement the policies so that the 20% reduction can be achieved. To reach this objective, awareness is required, and the EU has to lead by example, which it plans to do by introducing energy-efficient technologies in their buildings, vehicles, office supplies and other energy-using equipment. 

The Plan contains ten priority actions, which are to be implemented over the next six years, with further measures being introduced if required. A selection of these priorities are: increasing energy performance in buildings; improving labelling and adoption of minimum energy performance requirements for products and appliances; improving the fuel efficiency of cars; raising energy efficiency awareness through education and encouraging energy efficiency in built-up areas.

In more detail, the building sector has been identified as being responsible for up to 40% of the EU energy consumption. As a result, both the residential and commercial building sectors have been targeted as having the largest potential for cost-effective savings. Specifically, installing wall and roof insulation in residential buildings and improving energy management systems in commercial buildings.

In addition to these improvements, the EU plans to adopt a strategy for 'carbon neutral buildings', which are planned to become the norm in future construction. The UK on a national level is already moving towards this policy. However, the UK has yet to introduce the EU Energy Performance in Buildings Directive, which sets out minimum energy performance requirements for all types of buildings and ensures that new buildings, and large buildings subject to major renovations, meet these requirements within the EU.

As well as improving the construction of buildings in the future, the Commission is to adopt minimum energy performance requirements for 14 priority product groups, which will include boilers, water heaters, copying machines and electric motors. The EU intends to tackle the inefficiencies that are found in stand-by energy consumption. Therefore, in the future, it is planned that products will become more energy efficient, and will have to be labelled to confirm their level of energy consumption.

These proposals will obviously have a large impact on university estates, both in terms of building design and fit-out.  Given the size of an average university's portfolio and the ongoing maintenance and renewal programmes it is perhaps wise to be considering how best to accommodate the EU's proposals when planning for the future.  This is however not without its problems as EU's proposals are usually expressed in Directives which must then be implemented by primary UK legislation.  This leaves the door open for the UK government to implement the Directives in the manner they think appropriate which can lead to uncertainty both in relation to content and timing.

Once fully implemented, the EU Commission hopes that the Action Plan, 'will improve the EU's competitiveness, improve living standards of its citizens, boost employment and increase exports of new, energy efficient technology. On an individual level, the small changes that are made will hopefully bring future cost reductions and an improved environment.  Go back

andrew.pedley@pinsentmasons.com

HUMAN RESOURCES

Blog off! – tackling the risks of blogging

People have maintained online journals – or "blogs" – since the birth of the World Wide Web.  The term 'Web Log' was coined in 1997 but it is only since 2004 that "blogging" has become a phenomenon as a result of easy-to-use, cheap or free online services. 

The public and open format of blogs increasingly is being used as an alternative means to develop and share academic ideas.   Blogs are now fully integrated into university life and widely recognised as an effective means of communication.   Many universities even provide free servers for staff to host personal blogs.   

While the accessibility and prolific use of blogs makes their appeal to the sector obvious, recent high profile blogging cases have highlighted the potential risks for employers of "unregulated" blogging by their staff.   This article, relevant throughout the UK, considers the risk of blogging from an employment law perspective and provides some recommendations for best practice. 

The risks

If a university hosts on its server a blog on which employees can post material during the course of their employment, the university is likely to be vicariously liable for its content.   Even where the employee is not "blogging" on behalf of, or with the consent of the university, the fact that the blog is hosted by the university server may still make it liable for the content. 

Discrimination, harassment and bullying are areas in which the risks of vicarious liability are obvious.   Discriminatory or derogatory posts may also provide useful documentary evidence to a claimant seeking to demonstrate an employment culture where such behaviour is tolerated. 

A university could also find itself liable for infringing the intellectual property rights of others where the blogger copies content for the blog post from another source without permission.   Defamation is another key risk for university-hosted blogs if the contents damage the reputation of others, as the university will be treated as having published the defamatory content itself.

There is also a danger that employees may, inadvertently or otherwise, divulge information which should be treated as confidential.  Not all employees realise what is and is not appropriate to disclose in an increasingly competitive sector.  Cutting edge discoveries or research may be particularly sensitive, as well as financial information.  In some circumstances, employees may be breaching their contracts of employment by posting confidential information on the blog and in others the information may need to be treated as a whistle-blowing complaint. 

Arguably, a complaint by an employee about his/her employment made on an internal university blog might amount to a statutory grievance requiring the employer to follow the statutory grievance procedures introduced under the Employment Act 2002.  These define a grievance as any written complaint sent to the employer which could form the basis of an employment tribunal claim. Tribunals have already held that a complaint sent by email triggers the statutory procedure and, at present at least, there is no case law precluding complaints on a blog from falling outside the scope of the legislation. 

Extreme views of employee bloggers could also create criminal liability for institutions if the posts could be said to promote or lead to criminal activity.   Finally, the new DfES guidance, issued on 17 November, on tackling violent extremism in the name of Islam on campuses could potentially put information which comes to an employer's attention through a blog in a different light. 

Minimising the risks

No university has the resource to monitor the thousands of blogs maintained or contributed to by its staff.   There may be arguments for universities deciding in specific circumstances not to host personal websites or blogs maintained by their staff, as one university did for example during the controversy a few years ago about the AUT boycott of Israeli institutions and academics. Even so, it is not feasible to prohibit staff from maintaining their own personal sites – in the words of Meg Spohn, dismissed from DeVry University Colorado for bringing the university into disrepute on her personal blog, simply saying "Nobody here is allowed to have an internet presence" simply won't work.

Regulation rather than prohibition is likely to be the most feasible solution. Universities should however consider adopting a blogging policy to make clear what is and is not allowed and that breach will be treated as misconduct and could lead to disciplinary action. This policy could include safeguards such as defining acceptable use and content, reminding staff that they may be personally liable (under civil and criminal laws) for inappropriate content, forbidding copyright infringement or posting anyone else's content without permission and the disclosure of information confidential to the university.   In the latter case, guidance on the meaning of what is confidential may also be necessary. The policy might also make clear that blogs are not the appropriate forum to raise a complaint about work-related matters or practices within the institution. Staff should be advised to raise such issues through the appropriate channels by using the university's grievance or whistle blowing procedures.

The policy could also provide guidance as to how blogs should be managed internally, for example details of whom to contact with questions relating to suitability of content, what the blogger should do if they receive a complaint, and what they should do if they are concerned about the content of any comments posted to the blog. It may also be appropriate for blog sites hosted by the university to include a disclaimer making clear that the views expressed on them are the views of individuals and do not necessarily represent the views of the university.

Personal blogs not hosted by the university can also be addressed in the policy. The university can prohibit the use of university material, confidential information or university logos (or anything else which might represent that the university endorses the content) on such sites. It would also be permissible to warn employees that if the content of personal blogs brings the institution into disrepute or contains inappropriate content about the university, its policies or its staff, disciplinary action may be taken.

Tackling breaches

Where an employee breaches the rules, an employer's ability to take disciplinary action - and if appropriate to dismiss fairly - will be strengthened where there is a clear policy and/or guidance in place, and the consequences of breaching the policy have been made plain to its employees.  In order to rely on the policy the university will need to be able to demonstrate that all staff were aware of it and understood it.  A practical way to ensure this might be to circulate the policy by email and get all staff to tick a box confirming that they have read it and understood it.  Managers operating the policy should be given training on the policy, to encourage consistent application. 

Issues about blogging – especially the content of personal blogs – regularly give rise to arguments about freedom of expression and academic freedom. The fact that the comments are made in blogs does not really affect the legal principles that apply – these are the same regardless of the medium through which they are made. Our view is that these rules do not prevent employers from taking disciplinary action in response to inappropriate or unacceptable content or from tackling statements made on personal blogs which defame individuals or bring the institution into disrepute, which may in the latter case be a breach of the implied duties of loyalty and good faith.

Nevertheless, actions by employers to close down blogs or discipline staff for abuse tend to bring the competing rights of employers and their staff into sharp public focus. The clear risk that such disputes will give the original posting greater publicity is something which universities should weigh up before taking action.  Go back

catherine.barker@pinsentmasons.com

robyn.mcilroy@pinsentmasons.com

We welcome your feedback, criticism and suggestions

If you have any comments, or if you would like further advice or assistance with any of the issues covered in this briefing, or for information about Pinsent Masons' National Universities Team, please contact Nicola Hart, Head of Education at Pinsent Masons.

Email: nicola.hart@pinsentmasons.com

Tel: 0121-260 4050

While our Universities Legal Briefing is copyright, you are welcome to copy or forward it to colleagues within the institution, and to quote from it as long as the source is acknowledged.

© Pinsent Masons 2006

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