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Club Law And Management

Don't Sign On The Dotted Line...

There are many companies in the business of providing equipment, ranging from door entry systems and tills to CCTV cameras, screens and projectors and even major air conditioning work, to clubs on lease arrangements.

The information supplied by these companies often looks attractive and the sales personnel employed are mostly smart and personable. However, the fact is that most offers, which at a glance might appear might appear good value, ultimately involve complex leasing contracts which run for many years and sometimes incorporate automatic renewable terms in the event of cancellation notices not being provided by clubs within a specified time slot.

Leasing works on a hire purchase system and equipment will never ultimately belong to the club. In almost every case, companies selling the equipment use a seperate finance company which actually owns the equipment and it is this finance company which actually owns the equipment and it is this finance company which a club will have to deal with if there are problems with either the equipment or the lease.

Therefore when problems occur, the companies which sell the equipment to clubs no longer wish to be involved and clubs are left to defend themselves against finance companies which are often quick to threaten legal action in an aggressive manner, introducing additional finanvial penalties which ass further financial costs and often anxiety to club officers.

No Escape

Some clubs have ended up paying in the region of £23,000 for a simple door entry system and in one case a club calculated that £48,000 had been spent over ten years on a door entry system which was no longer being used. In each case, the leasing contracts were legally binding and left no escape route for the clubs concerned.

I strongly advise clubs not to enter into leasing arrangements for such equipment, however plausible the offers may appear to be. Glossy brochures and smart-talking salesmen cannot hide the fact that clubs would be better off buying the advertised equipment outright (with perhaps an additional simple maintennce agreement), or borrowing the money from a bank to purchase outright what is required.

If, for any reason, a lease agreement is being considered by the Club then make sure that prior to signing the agreement you calculate the total cost of the agreement.

All clubs with such agreements in place should re-examine the contracts they have entered into and make careful notes as to when cancellation notices should be made. Also avoid agreeing to offers of upgrading lease equipment already in place which invariably create new contract terms.

Real life examples of these types of agreements include a Conservative Club in Hampshire which signed a 60 month contract (5 years) with Tower Leasing for a lease agreement which consisted of a large flat television with surround sound. The total cost of this contract will be £8351.50, significantly higher than the value of the television (a similar television and audio equipment can be purchased from a high street retailer for under £1000).

A Club in Newcastle signed an 87 month (7.25 years) lease with Shire Leasing for a telephone system and the total cost of this contract to the Club will be £5111.25. It is worth noting that in neither of these two real life examples will the Clubs become the owners of the equipment at the end of the terms. The ownership will revert back to the finance company.

Extra Cost

The above Conservative Club is currently experiencing problems with their telephone system which means they are unable to use it. However, under the terms of the lease agreement, even faulty equipment must still be paid for. Most agreements will offer an additional maintenance agreement which will cost extra and will claim to provide on-site support or repairs for the equipment. Once the contract has been signed the Club would have to pay for repairs to the equipment. Once the contract has been signed the Club would have to pay for repairs to the equipment on top of the existing rental contracts and will have to return the equipment in good working order at the end of the contract.

Certainly, most people are all happy to buy equipment for their homes without feeling that they should also purchase an extra maintenance agreement. Also consider that by purchasing equipment outright you will be covered by the manufacture's warranty and by the Sale of Goods Act; neither of which will apply to a rental agreement between a Club and a finance company.

If Clubs do have cash flow problems, which mean a monthly payment plan for new equipment is attractive or necessary, then they should consider retailer led payment plans. Whilst you could still be paying anything from 10-20% APR on top of the cost of the television (although shop around, often retailers offer interest free periods) it is still likely to be better value than a lease agreement and the equipment will be owned by the Club at the end of the tenure.

Even buying equipment on a credit card is likely to be cheaper than a lease agreement.

If we applied a cash valuation of £1000 for the above Club's television and audio equipment and looking at the ultimate repayment figure of £8351.50 this, over the 60 month agreement, equates to roughly 168% APR! However, since leasing companies are not providing finance, but rather equipment they are not obliged to disclose the total APR as Credit Card companies and Banks must do.

Options

Buying equipment outright will always be the most cost effective way. However, if this is not possible make sure that all options are investigated. A loan from a bank with a low APR should also be considered when needing to make a capital purchase. If, for any reason, a lease agreement is being considered by the Club then make sure that prior to signing the agreement that the total cost of the agreement is calculated. It is unlikely anyone at either of the above Clubs would have found the lease agreement good value had they calculated that the total cost of the equipment.

Also consider the needs of the members prior to making any purchase or agreement. Whilst a 50" plasma television with surround sound may sound like an attractive option, it is just as likely that the members would be as happy with a 32" television which can be purchased outright for around £300 from high street retailers. Or look at alternative options for sourcing equipment, how many members of the Clubs might have an old TV at home they are willing to give to the Club?

Clubs who already have entered into such agreements are welcome to contact the ACC for assistance.

Important repeat of HMRC Gaming Machines Update

The ACC understands that the dispute in respect of Automated Lottery Machines is now reaching a point at which there appears to be an impasse between HM Revenue & Customs (HMRC) and the manufacturer, distributors, and operators. It is now at the stage where HMRC are sending out assessments to Clubs directly for the unpaid VAT which HMRC continue to allege is owed on these machines.

The ACC has in conjunction with Dransfields, arranged to provide all Clubs assistance from Ian Spencer & Associates Limited in dealing with these assessments when they are recieved by Clubs. Ian Spencer & Associates Limited have been closely working with Dransfields since 2007 when this dispute first arose.

Ian Spencer is the ACC's contact at Ian Spencer & Associates Limited and is also a director of the firm. Ian has a strong background in VAT and Customs and Excise duties cases. He spent 8 years working within HM Customs & Excise (HMCE) and since leaving HMCE in 1997 has continued to work as a VAT Consultant. During the last 13 years his time has been filled with dealing with many disputes such as the one in question, where his role has been to minimise disruption to the business as well as minimising the financial risk.

We have arranged for Ian to deal with the effects of any action HMRC may take against our Clubs in respect of what they believe to be the incorrect (taxation) treatment of the Automated Lottery Machine that Clubs have operated, and a subsidised fixed fee of £100 has been agreed for this services. If you would like to take advantage of this offer then please contact Ian using one of the following methods: ianspencer@vatproblemssolved.com Tel: 0114 258 5967, Mob: 07904 864209.

Clubs will need to supply Ian with the following information:

1. Completed form 64-8 - This form can be obtained from either the ACC or directly from Ian.

2. Copies of all relevant documents from HMRC.

3. Details of the club - i.e. name and address. VAT registration number.

4. Details of Automated lottery machines operated in the period prior to 31 August 2007 .i.e. types (names) number and relevant dates

5. Details of income generated from these machines broken down into VAT periods.

6. A copy of a photo page from the passport of one of the company (i.e. club) officers, together with a copy of a recent home utility bill in their name (required by Money laundering regulations)

We believe this is a highly competitive arrangement for Clubs in this situation, which is being subsidised heavily by both the ACC and Dransfield. We strongly urge any Club affected to take advantage of this arrangement when dealing with these claims.

Please contact the ACC if you have any questions about this service.

Minotaur Asset Finance

A large number of Clubs have reported having recieved a letter and leaflet from Minotaur Asset Finance. This company seeks to provide assistance to Clubs and makes particular reference to members risking personal liability of debt. The company is interested in planning and propert development of Club sites and offers to assist Clubs with debt management whilst they arrange planning applications to be made. The company also offers a "free" cost management service to those Clubs which are not experiencing any difficulties.

Please not Minotaur Asset Finance is not an ACC recommended company and the ACC would advise Clubs to refer any proposals that may be made by this company to the ACC.