Corporation tax, profits and arms' length status.

Sheila Oliver (Ataliwyd y cyfrif) made this Rhyddid Gwybodaeth request to Stockport Homes Limited

This request has been closed to new correspondence from the public body. Contact us if you think it ought be re-opened.

Roedd y cais yn llwyddiannus.

Sheila Oliver (Ataliwyd y cyfrif)

Dear Stockport Homes Limited,

I assume Stockport Homes is liable to Corporation tax on any profits, whereas when this work was in-house at the Council no such liability would ever arise. Please let me have your latest accounts and let me know what sort of test these profits would have to pass to remain "Arms' length".

Yours faithfully,

Sheila Oliver

Customer Involvement, Stockport Homes Limited

You have reached the Stockport Homes Customer Involvement Team.

Your email has been received. We will respond to your email as soon as we
can.

If your enquiry/email is urgent please call the Customer Involvement Team
on 0161 474 2862.

Regards,

Customer Involvement Team

Stockport Homes

dangos adrannau a ddyfynnir

Sheila Oliver (Ataliwyd y cyfrif)

Dear Customer Involvement,

Please take this as a polite reminder.

With very best wishes.

Yours sincerely,

Sheila Oliver

Customer Involvement, Stockport Homes Limited

You have reached the Stockport Homes Customer Involvement Team.

 

Your email has been received.  We will respond to your email as soon as we
can.

 

If your enquiry/email is urgent please call the Customer Involvement Team
on 0161 474 2862.

 

Regards,

 

Customer Involvement Team

Stockport Homes

 

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Sheila Oliver (Ataliwyd y cyfrif)

Dear Customer Involvement,

Hi

Please could I have a reply. It appears that your company received £22,257,000 in public money. I think we need some accountability here. Could you please comply with FOI legislation.

Yours sincerely,

Sheila Oliver

Customer Involvement,

You have reached the Stockport Homes Customer Involvement Team.

 

Your email has been received.  We will respond to your email as soon as we
can.

 

If your enquiry/email is urgent please call the Customer Involvement Team
on 0161 474 2862.

 

Regards,

 

Customer Involvement Team

Stockport Homes

 

dangos adrannau a ddyfynnir

Jeremy Beatty, Stockport Homes Limited

Dear Sheila

 

Thank you for your request dated 26 October 2011.  Stockport Homes
responds to Freedom of Information requests within 20 working days.

 

You have asked about the £22,257,000 that shows in Stockport Homes’
2009/10 accounts that my colleague Adam Howell sent you on 5 September
2011.

 

Stockport Homes Limited is an Arms-Length Management Organisation or ALMO.
This means that while the Council established the company, it operates
independently from it on day-to-day matters. Under a Management Agreement
with the Council, Stockport Homes receives a sum of money to manage and
maintain the housing stock on the Council’s behalf. 

 

The way in which the Management Fee is calculated is complex and involves
rents that are collected locally in Stockport being redistributed by
central government according to different areas’ needs.  However, as a
simple principle it can be said that the Management Fee Stockport Homes
receives is to provide the services that customers pay for.

 

I trust this is helpful but please do not hesitate to let me know if you
have any further questions.

 

Jeremy Beatty

Governance Manager

Corporate Services Directorate

Stockport Homes

 

* 1 St Peter’s Square, Stockport, SK1 1NZ

(  0161 474 2850 / 07527 387 156

 

dangos adrannau a ddyfynnir

Sheila Oliver (Ataliwyd y cyfrif)

Dear Jeremy Beatty,

Thank you. I am trying to understand the situation. Apparently there is a £10 million pension fund black hole in Stockport Homes accounts, which has suddenly appeared over a period of one year. In addition, there seems to have been a very large increase over a one year period in the amount of directors' fees, and 67% of your assets are held in equities, which I am led to believe should in the current financial climate be transferred to safer bonds.

I shall, no doubt, be back in touch over these matters, as this is all my money.

Yours sincerely,

Sheila Oliver

Jeremy Beatty, Stockport Homes Limited

Hello Sheila, I will forward your question to one of my colleagues and we will prepare a response

Yours sincerely

Jeremy Beatty
Governance Manager
Corporate Services Directorate
Stockport Homes

S 1 St Peter’s Square, Stockport, SK1 1NZ
1  0161 474 2850 / 07527 387 156

dangos adrannau a ddyfynnir

Sheila Oliver (Ataliwyd y cyfrif)

Dear Jeremy Beatty,

Thank you, that is impressively helpful. There may be a simple explanation.

Yours sincerely,

Sheila Oliver

Jeremy Beatty, Stockport Homes Limited

Dear Sheila, in response to your question please find below a response prepared by Stockport Homes' Head of Finance. If you need further clarification please send your question to me and I will coordinate our response. Thank-you.

YOUR QUESTION

I am trying to understand the situation. Apparently there is a £10 million pension fund black hole in Stockport Homes accounts, which has suddenly appeared over a period of one year. In addition, there seems to have been a very large increase over a one
year period in the amount of directors' fees, and 67% of your assets are held in equities, which I am led to believe should in the current financial climate be transferred to safer bonds. I shall, no doubt, be back in touch over these matters, as this is all my money.

STOCKPORT HOMES REPLY

FRS17 is an accounting standard that requires companies to account for pension assets and liabilities on their balance sheets. This figure is based on assumptions made by pension specialists about the future and is only a snap shot in time - the assumptions can change quite substantially from year to year. For example Stockport Homes' pension liability was recorded as £10.7m deficit at March 2010, but recently improved to £1.172m deficit at March 2011 - it actually showed a £19k surplus at March 2008. It is worth noting that the pension deficits were not just shown for Stockport Homes but many organisations who are part of the Greater Manchester Pension Fund and indeed national pension funds. It is also worth noting that this is not a figure that Stockport Homes will have to physically pay out now. The Government is trying to make pensions more affordable in the longer term and therefore measures such as increasing the age people can draw down their pension and increasing contribution rates are currently being looked in to.

In terms of Directors Fees - the total amount paid to Directors actually decreased between 2010 and 2011 (please see Stockport Homes Accounts Year Ended 2011) - the year before there was a maternity cover requirement.

Regarding your point on 67% assets held in equities - Stockport Homes hold assets which include housing stock and would therefore not be holding these as bonds. Stockport Homes is a not for profit organisation and any monies it holds will be spent on services to tenants or the provision of building new homes.

Jeremy Beatty
Governance Manager
Corporate Services Directorate
Stockport Homes

S 1 St Peter’s Square, Stockport, SK1 1NZ
1  0161 474 2850 / 07527 387 156

dangos adrannau a ddyfynnir

Sheila Oliver (Ataliwyd y cyfrif)

Dear Jeremy Beatty,

Many thanks for that comprehensive answer. I will get it checked by a chartered accountant and get back to you if necessary.

Kind regards

Yours sincerely,

Sheila Oliver

Sheila Oliver (Ataliwyd y cyfrif)

Dear Jeremy Beatty,

Thank you for your thorough reply of 15/11 and later. The £22,257,000 in the 2010 accounts - you say that the amount is shown in the 2010 accounts but you have also added to its explanation. The purpose of the payments from the Council - that is to manage and maintain housing stock of the Council. The calculation is obviously complex and involves Central Government; you also say that it is simply to provide the services that customers pay for. My concern is, also simply, to have your assurance that this figure is the same as it would have been between unconnected arms' length parties notwithstanding that the deal is between the wholly controlled ALMO and the wholly controlling Council.

Thank you for keeping the Head of Finance informed and for your offer to be the intermediary for any future correspondence. To remove any doubt about the purpose of my question and the ten million pound black hole - my concern is (and I don't yet have a copy of the 2011 accounts to complete my picture) that I cannot see how the swings in values of the Pension Liability can be the change of assumptions only - they of course must be grave indeed - but can I be assured that these savings equal to about 30% of the gross liability in year represent the usual life expectations and retirement ages, and not a political moving of the goalposts? Counting on not to have to meet the whole of the liability. Agreed that the Employers Balance Sheet has to show the actuarilly calculated liability of the Pension Fund less assets, which have been put aside to meet it. However, the assets to which I refer used in fixing the net liability and equities of the pension fund represent two thirds of the total assets put aside as they did in 2009.

My expression "Bonds" was simply to cover more equity investments as equities hardly seems like a safe haven in these times.

I look forward to a reply in due course. Please don't feel obliged to adhere to the 20 days guideline. I appreciate these are complex matters.

With very warmest best wishes and a Happy New Year.

Yours sincerely,

Sheila Oliver

Jeremy Beatty, Stockport Homes Limited

Hello Sheila, please find responses below:

From your e-mail I interpret there are 2 main questions:

1 "My concern is, also simply, to have your assurance that this figure is the same as it would have been between unconnected arms' length parties notwithstanding that the deal is between the wholly controlled ALMO and the wholly controlling Council"

Response

The Management Fee that Stockport Homes receive from the Council is paid for from the Council's Housing Revenue Account - known as the HRA. The HRA is where monies from council rents and service charges is paid in to. This account is a ring-fenced account, i.e. the monies received from tenants can only be spent on services to tenants and the maintenance and investment of the housing stock. Therefore whether the Council paid Stockport Homes or any other unconnected provider - it would be the money that is available within the HRA that would be paid over - therefore it is not the fact that Stockport Homes is connected that drives this fee. It is worth noting however that because Stockport Homes have one of the best rent collection and void turnaround performance in the country, there is more money available as a result to spend on tenant services, which would not be the case with any other provider with lower performance.

2 "Can I be assured that these savings equal to about 30% of the gross liability in year represent the usual life expectations and retirement ages, and not a political moving of the goalposts?"

Response

Pension figures quoted in the accounts are provided by an external company that provide specialist actuarial pension advice to local authorities. They manage the Greater Manchester Pension Fund, of which Stockport Homes is a member. Actuarial assumptions are based on financial estimates and are not influenced by politics. The assumptions used are also externally audited by an accountancy firm to ensure they are realistic and prudent and have not been influenced by political motives.

Yours sincerely

Jeremy Beatty
Governance Manager
Corporate Services Directorate
Stockport Homes

S 1 St Peter’s Square, Stockport, SK1 1NZ
1  0161 474 2850 / 07527 387 156

dangos adrannau a ddyfynnir

Sheila Oliver (Ataliwyd y cyfrif)

Dear Jeremy Beatty,

Thank you very much for your kind and comprehensive reply. To be perfectly honest, I am not terribly good with money, although much better than Fred Goodwin. I do, fortunately, have access to leading experts in the field. I shall pass your reply by them and see what they think.

Just one more thing, please, please tell me "Pension figures quoted in the accounts are provided by an external company that provide specialist actuarial pension advice to local authorities. They manage the Greater Manchester Pension Fund" please, please tell me you are not talking about GVA Grimley here as the external company.

Kind regards

Sheila

Jeremy Beatty, Stockport Homes Limited

Hello Sheila

I will follow up the points you raise

Yours sincerely

Jeremy Beatty
Governance Manager
Corporate Services Directorate
Stockport Homes

S 1 St Peter’s Square, Stockport, SK1 1NZ
1  0161 474 2850 / 07527 387 156

dangos adrannau a ddyfynnir

Jeremy Beatty, Stockport Homes Limited

Dear Sheila, I can confirm that GVA Grimley do not provide the pension figures you refer to.

Regards

Jeremy Beatty
Governance Manager
Corporate Services Directorate
Stockport Homes

S 1 St Peter’s Square, Stockport, SK1 1NZ
1  0161 474 2850 / 07527 387 156

dangos adrannau a ddyfynnir

Jeremy Beatty, Stockport Homes Limited

Dear Sheila, I can confirm that GVA Grimley do not provide the pension figures you refer to.

Regards

Jeremy Beatty
Governance Manager
Corporate Services Directorate
Stockport Homes

S 1 St Peter’s Square, Stockport, SK1 1NZ
1  0161 474 2850 / 07527 387 156

dangos adrannau a ddyfynnir

Sheila Oliver (Ataliwyd y cyfrif)

Dear Jeremy Beatty,

Phew! What a relief!

Grimley Fiendisch provided the traffic reports for the collapsing primary school built on a still gassing toxic waste dump where children are leaving in droves due to bullying, the teachers parents and childen hate it, local residents have been cut off from access to the back of their own homes, necessitating carrying new furniture circa a quarter of a mile and stopping ambulance crews reaching old ladies in their 80s who fall. The school has only been open since September and the police have said how dangerous the traffic is.

Grimley Fiendisch said it would all be fine, as they trousered a lot of my cash.

Thank you so much for putting my mind at rest.

Yours sincerely,

Sheila Oliver