North Yorkshire Moors Railway General Discussion

A minority of parliamentarians are lawyers. And some would suggest that if more MPs had legal experience, laws might be better...

 

Out of interest, I looked at a few non-railway attractions that have Gift-aid admissions, and looked at what their ticket policy was:

National Museum of the Royal Navy (Portsmouth Historic Dockyard, HMS Victory, Hartlepool dockyard, Fleet Air Arm museum etc):

Beamish

Ironbridge Gorge Museums

Brooklands Museum

Bristol Zoo

etc etc ...

Now I am sure (pace @Lineisclear ) that all these organisations have considered their responsibilities under the Consumer Rights Act. What is clear from all of them is that once you have bought a ticket, there is no refund. That seems to be a direct consequence of HMRC rules about donations - in essence in each case you haven't bought a ticket, you have made a donation and that cannot be returned. Nowhere in any of the Ts&Cs could I find any scenario in which they would refund ticket prices. (And a very clear explanation as to why not in the case of the NMRN, explicitly noting the Gift Aid rules).

The NYMR seems to be very much out on a limb in how it has interpreted the Consumer Rights Act in terms of having an explicit schedule of refunds. Are all the organisations above wrong in their interpretation?

Tom

 

It’s interesting that we are seeing another example with the recently passed Digital Markets Competition and Consumers Act. It establishes a consumer’s right to a 14 day cooling off period on any automatic subscription renewal which many charities ( and some heritage railways) rely on including recovery of Gift Aid. It seems the substantial financial impact on them wasn’t understood so now special measures are needed to protect them from the law of unintended consequences.

 

I have no doubt a) that the legislation was ill-thought through and b) special measures are required.

My question at this point is about how those special measures are communicated, and with what authority. "Something must be done" will not suffice, and may leave people and organisations very exposed if they act outside the rules - hence my concern at the approach taken by NYMR and the lack of any obvious charity sector precedent for it.

As it happens, I would have thought that any organisation large enough to have a degree of automation would be able to defer submission of Gift Aid claims until after any such cooling off period had completed, introducing a somewhat messy two stage process. The need for something of the sort is already envisaged within Gift Aid rules for certain kinds of declaration where the charity only has a partial declaration.

I do agree that there will be other, less tidy, consequences.

 

No Tom, I accept the T&C’s need looking at. That has to be done anyway following the shift to the alternative model for Gift Aid recovery. Of course it means that the adverse effect already identified will result. Those who buy a ticket to travel will retain their consumer rights. Those, possibly in the same party, who make a Gift Aid donation may not have the same right to compensation or a refund. The interesting legal question is whether in allowing admission to all the attractions you list they are providing a service? That’s defined by the Value Added Tax 1994 as” anything which is not a supply of goods but is done for a consideration”. A donation that unlocks admission looks like valuable consideration! It looks as if all those organisations will have the same problem….conflict between the Gift Aid rules and their statutory obligations to consumers.

 

As long as a customer is clear that by GA'ding the money, they have made a donation, I don't think there is a problem with the 2015 legislation. Their transaction is materially different.

If I purchase, I have rights, but if I donate the circumstances change.

Much speculation on this forum thread has come about through lack of transparency by the NYMR management. Few meaningful figures presented and a defensive stance from a board member. We all love the Moors line but things are clearly adrift.
Last year there were reports that there was a financial squeeze, that things were hard etc
These were denied by the management with statements that the bank had confidence in the plc etc. This was restated at the AGM, yet on the 29th August the bank placed a charge on all the plc assets.

 

That's an understandable misreading of recent changes with the NYMR's bank which were explained to members beforehand in a Moors Line article. The bank have held security over plc assets for many years with a cross guarantee from the Trust that meant its assets were effectively included. The changes have rationalised that and the updated charge reflects the revised documentation. The management have never denied thst times are hard. Quite the opposite as the Finance Directors' report explained at the last AGM. The statement that the bank have confidence in the railway's management was true then and continues to be so.

 

But the Gift Aid rules date from about 2006 and the CRA dates from 2015. That is nine years to work through the issues of the two pieces of legislation together. So why do you think they will have conflicts now that haven’t arisen over the last 9 years? Why is it suddenly a problem now?

As I look at it, either the NYMR has this wrong, or all those other organisations do. Occam’s razor suggests to me it is easier to assume that one organisation is wrong than many.

Tom

 

The alternative is that they haven’t got it wrong but are calculating that breach of the 2015 Act is the lesser of two evils. After all most of those listed will not be operating timetabled services nor will there be growing expectations from their visitors that the right to claim compensation and refunds on the national network will apply on heritage railways. In short their risk of falling foul of the 2015 act is much lower than for a heritage railways.

 

Legally the calculation may lean to the 2015 act, but the HMRC may take a different view and demand the return of four years gift aid!

 

In

In which case it would have to accept that a vast range of charities have the obligation to provide compensation or refunds under the 2015 Act. The argument that all the charitable attractions are not providing a service is unconvincing. The Gift Aided transaction is a donation but it unlocks admission . In the terms of the statutory definition of a service the donation is consideration for admission so the 2015 Act would bite. Would HMRC want to initiate action that would close many charities?

 

I'm amazed that @Lineisclear continues to post on this thread TBH.

There is a small group of forum members who may feel well-informed about heritage issues, they may feel justifiably worried about the NYMR's finances, or have had poor experiences with the current management. But they just seem to be queueing up to ask question after question - often rhetorically - without ever acknowledging any of the responses from @Lineisclear.

Many of the management decisions will have been made based on information which isn't in the public domain.

Forum members might want to think about why few senior representatives from heritage railway bother to post on here, when they get this sort of treatment. A bit more respect, and acknowledgement of the complexities of running visitor attractions would be helpful. Instead, we get a stream of "And another thing... " posts from people who don't necessarily know all the details about why decisions were made.

As for the calls of "management out", the heritage railway industry isn't run like football clubs - thankfully. And where would the NYMR (or the Tornado project) find new, "better" managers?

I have no link to anyone at the NYMR or any investment in its operation. I just feel that this forum would be a better place if its members treated the few remaining heritage railway managers on here with a bit more respect. You may not agree with the decisions they've made or how they reached their conclusions. That's fine. But is this type of interrogation really necessary, effective, or giving you the answers you are seeking?

I would like to read about the NYMR in a more balanced way. So, no, I'm not going to ignore the thread just because of a vocal minority.

 

I wonder myself sometimes! Perhaps it’s a game of two halves. The debate over Gift Aid for instance has shown how a discussion forum can address serious issues and help develop understanding. On the other hand there is a lot of the unhelpful negativity which sometimes gives the impression that the cardinal sin of management is failing to recognise the superior knowledge and expertise of the opinionated poster. For the record I’m not a manager but I do see the time and effort they put in and their determination to see their railway succeed. The sector is not renowned for its generosity when it comes to salary levels. Many paid staff are taking on responsibilities that would command far higher remuneration outside the heritage railway bubble.In my experience a lot of them are motivated primarily by passion for the railway. Similarly volunteer directors and trustees take on responsibilities and potential personal liability for which they would be handsomely compensated in a normal business. Some are even daft enough to engage on social media.

 

There’s an important distinction here - that the rules for Gift Aid specifically preclude a donation being considered a form of consideration. At that point the rest of the argument seems to fall.

As a non-lawyer, I’m very cautious about using a definition from an act written for one purpose to interpret another - especially where the subsequent regulations already impose a different interpretation. While I can see how your argument might apply, unless you can point to explicit HMRC guidance or a legal judgement, it can only be an argument.

That suspicion is reinforced by other aspects of your argument, for example the suggestion that “would HMRC wish to close down so many charities”. Given the Treasury’s willingness to upset people over taxation, I’m not sure I regard that as persuasive - or would be particularly keen to bet my charity’s resources on that outcome given a) the costs of fighting a case and b) the penalties that HMRC can levy.

At that point, my view aligns with @Jamessquared in applying Occams Razor, and seeing NYMR as the outlier.

 

According to the latest published accounts, "a guarantee has been granted by NYMR plc to the value of £2.5m" (Note 23) (presumably to secure obligations of the Trust to someone, it is a bit of a detached sentence and does not say). It is also a questionable amount in view of the financial situation of the plc, it would be interesting to see the justification in the board minutes for this) and that seems to have been in place for some years. I cannot see any reference to a guarantee issued by the Trust to which you refer and there is nothing stated under Note 32 Contingent Liabilities. However, I note that the guarantee from the plc does not appear in their accounts, which seems a strange omission and misleading to creditors. Perhaps the Trust accounts are equally silent about guarantees issued by the Trust? Was there a guarantee by the Trust of plc's obligations in the past i.e. you are referring to a historic matter?

 

I for one am grateful for the continued engagement from @Lineisclear in this thread, and continuing to give his opinion in a polite and thoughtful way.

The issue for me though is a wider one than just the NYMR. All railways are under increasing regulatory and financial pressures, and many railways are either actively engaged in governance reviews, or considering whether to formally review their governance. The model adopted by the NYMR (essentially an overarching charity, Gift Aid on tickets, reduced member involvement in decision making etc.) is being strongly promoted as the optimum model for Heritage Railways. So it is important to understand whether that model is actually successful. Certainly to my eyes, putting the charity as the "apex" organisation seems to raise more questions than answers, and the one particular advantage promoted - the ability to reclaim Gift Aid on some fares - seems to introduce as many issues as it solves. (Around pricing and consumer rights, to name but two areas). So the issues are wider than just the NYMR: either that railway has got things right (in which case we should all learn and as required move towards a similar model) - or else they have got it wrong, and the chosen path is problematic.

Tom

 

If someone simply makes a donation to a charity there is no issue. However the Gift Aid model is based on that donation entitling the donor to receive a benefit in return............admission to the charity's site/attraction or whatever. The very essence of the relationship is contractual. Make a donation and you'll be allowed in. If it wasn't the proposition would be that anyone has the right of free admission but you may opt to make a voluntary donation. As far as I know for all those charities identified by Tom the general rule would be that anyone not making a donation or paying the entrance fee would be denied access. Consequently there is convincing evidence of payment of consideration, a donation of financial value, in return for a service, in the form of admission. Those charities are stuck with their legal duties as contractual providers of a service so if HMRC decide to view those as incompatible with recovery of Gift Aid an awful lot of charities' financial models would collapse .

 

I'd elaborate on that point a wee bit more. If I look at discussions with @Lineisclear (and I also welcome his engagement on this and other threads), there is one aspect to the discussion which is about the benefits of charitable status and how it affects particularly income. There's another, technically different but because of the NYMR model intertwined, discussion about the trade off between leadership direction and membership involvement.

This thread brings those two together, as NYMR is a living experiment in both exploiting the advantages of a charitable apex organisation and centralising governance authority in the board.

 

Is that much different to what the Ffestiniog have been doing for the last 70 years (minus the democracy of the NYMR)?

 

That may be - but the guidance from HMRC is unambiguous, as is the interpretation of the museums quoted by @Jamessquared.

While as a matter of principle I think I agree with your interpretation of how things should be, I am really struggling in the absence of proper precedent (as distinct from one individual's development of a skeleton argument) with it as a statement of how things are.

The background is worth considering. HMRC changed the regulations with, primarily, stately homes in mind. They were exploiting a loophole (I remember getting "free" admission to Chatsworth in I think 2004 return for a donation that happened to be the value of paid admission), and it was plugged with the rules that we have now. Unless I'm missing something, the definition relied upon by HMRC that converts payment for admission into a donation, has not been amended or overturned.

I find that question of voice really important, and needs to layer into any assessment of the risks of any course of conduct. If I were a trustee, I would require really solid legal advice before entering into this.