2019: The year in review
Managing Partner, Simon Leighton, recalls the highs…Read More › ›
A panel of experts spanning housing law, pensions, VAT and procurement gave their view on ways RPs could save money and meet the challenges of the new housing agenda at a recent seminar hosted jointly by Croftons and accountants Crowe Clarke Whitehill.
Croftons’ Head of Governance and Regulatory, Jo Savage, spoke about a range of opportunities and strategies open to RPs to help them make efficiencies, continue to grow, and ultimately secure their long term success. Jo covered:
Subsidiaries – setting up subsidiaries, be they companies, Community Benefit Societies, RPs, charitable bodies or CIOs, is a relatively straightforward way of helping RPs grow and diversify. But it’s important to be clear about the purpose of the subsidiary and any regulatory restrictions.
Partnerships – many RPs are exploring ways to make savings by working together and sharing knowledge, services and people. Jo outlined the many options available including joint contracts, joint ventures, cost sharing groups, mergers and group structures.
Reviewing contracts – It’s well worth reviewing all current contracts to ensure KPIs are being met, assess whether termination could save money in the long run where contracts aren’t effective, and holding suppliers to any added value work promised.
Reclassification – while the ONS decision has created uncertainty in the sector, there’s no real impact on day-to-day operations. The focus is now on reclassifying as private sector asap to get the £60b off the UK’s balance sheet, but as always the devil will be in the detail of what any relaxing of regulation will look like, and how funders will view this.
Right to Buy – our view is that the voluntary deal is better than full RTB legislation, but as with many of the recent changes the detail we know is much less than the detail we don’t! Take a look at our recent blog on the subject that covers many of the unanswered questions.
Deregistration – while deregistration is an option some RPs may consider, Jo’s view is that the onerous deregistration criteria and the funding implications will be too restrictive making it unlikely that many, if any, will take this course of action.
Charlie Norman, Chief Executive at St Vincent’s, spoke about the significant savings they had made by setting up a cost-sharing vehicle with Mosscare Housing to provide a joint repairs and maintenance service.
Through the partnership a total of £600,000 of savings will be realised annually through VAT and other efficiencies – a substantial part of the £2m St Vincent’s has identified they need to save to mitigate the impact of the 1% rent reduction.
VAT Director at Crowe Clarke Whitehill, Adam Cutler gave an accountant’s view of the housing sector. Adam suggested a range of VAT-related areas RPs should consider moving forward, such as the VAT treatment of RTB sales, saving VAT on professional fees for developing RPs, VAT aspects of cost-sharing partnerships, and VAT efficiencies in repairs and maintenance services, through a repairs joint venture for example.
Finally, independent financial adviser, Chris Loake, discussed ways to mitigate the pension issues many RPs face. Final salary pensions may be mostly a thing of the past, but the legacy issue of SHPS are an increasing and indefinite liability, and one that now must be included on balance sheets and assets and liabilities registers.
Key areas covered included buying out of SHPS, which will bring long term gains, but very high short term cost is. A number of RPs are considering this with one, Radian, having already bought out. There also other alternatives to consider, such as extending the retirement age, changing the rate of revaluation for member benefits, increasing member contributions, and reducing the rate of future accrual.
If you would like to discuss further any of the issues raised above please get in touch with our Head of Governance and Regulation, Jo Savage.
Croftons is the trading name of Croftons Solicitors LLP, a limited liability partnership registered in England and Wales with number OC343375. The term ‘partner’, if used, denotes a member of Croftons Solicitors LLP or a senior solicitor of Croftons Solicitors LLP with equivalent standing and qualifications. A full list of members is open to inspection at the office. Croftons is authorised and regulated by The Solicitors Regulation Authority (SRA) number 508041. Croftons has its principal place of business at The Lexicon, Mount Street, Manchester, M2 5FA.