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2 Spring 2016
Contents
Finance Policy
Quarterly Update
Spring 2016
Please note: Some of the articles in the Finance Policy Quarterly Update may contain views which are not the views of the National Housing Federation.
1. Introduction
Welcome ......................................................................... 3
2. Economic update
Markets, rates, and general confusion ......................... 4
3. HCA Global Accounts
Headlines from the Global Accounts 2015 .................... 6
Statement from David Orr ............................................. 6
Surpluses: an explanation ............................................. 7
4. Reclassification and deregulation
Housing associations registered with the Charity Commission ........................................ 9
Special Administration Regime ................................... 10
5. Deregulation and valuers
Deregulation – what does it mean for valuations? ..........12
6. Voluntary Right to Buy
An update for members ............................................... 14
7. Consumer credit regulations
Stringent new consumer credit regulations ............... 15
Next steps .................................................................... 15
Timescales ................................................................... 16
8. FRS102
Financial Reporting Standard 102 and financial instruments ........................................... 17
9. The Financial Reporting Council
Housing association representation on the FRC ......... 18
Housing SORP-making Body Annual Review 2015 ..... 18
10. Good governance
In-depth assessments – an advice note for housing associations ...................................... 19
Mergers, group structures and partnerships – a voluntary code .................................. 20
11. Efficiency and VfM
Peer learning groups ................................................... 22
State of the sector with Housemark ............................ 22
VfM self-assessments ................................................. 22
12. Pension update
Could taxation reform be a tipping point for housing pension schemes?........................... 23
Has the time come to harmonise? .............................. 24
13. Apprenticeship levy and employment taxes
Key features of the new regime ................................... 25
Using the fund for apprenticeships ............................. 25
No employer’s Class 1 NIC on apprentice earnings from 6 April 2016 .......................................... 25
What do employers need to do now? ........................... 26
Next steps .................................................................... 26
More Information ......................................................... 26
14. Taxation
Changes to the reduced rate – housing associations protected ................................... 27
Allpay – additional VAT cost ......................................... 27
Ruling and implications ............................................... 27
Next steps .................................................................... 27
15. Events
Housing Association National Accountancy Awards 2016 ........................................... 28
Treasury Management Conference 2016 ..................... 28
16. Diary dates
Upcoming events at the Federation ............................. 29
Xxxx3
3 Spring 2016
Introduction1
As we approach the end of a landmark financial year, ahead of the 2016 Housing Finance Conference and Exhibition, this update sets out the latest information and analysis on key financial issues affecting the sector.
Highlights include:
• Savills and JLL considering how deregulation will affect property valuation across the sector
• an update on the Federation’s Voluntary Right to Buy implementation work• advice and guidance on how to prepare for and manage the in-depth assessment
process.
As ever, we weren’t able to include every financial topic in this update, so we always encourage you to contact the Finance Policy team if you require additional support, information, or clarification on anything you’ve read in this update.
And, if you’re attending this year’s conference, make sure you download this edition of the Finance Policy Quarterly Update through the conference app along with other key information about the event.
Nick Yandle, Policy Offer
Welcome to the Spring 2016 edition of the Finance Policy Quarterly Update
Introduction1
Contents
4 Spring 2016
Introduction1
Contents
Economic update – markets, rates and general confusion
Interest rates in the USA were finally raised from 0% to 0.25% in December. The USA has perhaps weathered the financial storm better than most
European countries, and this was supposed to fire the starting gun on the normalisation of interest rates and Central Bank policies.
However, after a torrid start to 2016 in equity, bond and commodity markets, there is now less confidence that this normalisation process is about to start any time soon, in the USA, the UK or anywhere else where monetary policy has been used in very strange ways for nearly a decade.
One thing which – relatively – does seem clear is that policies such as quantitative easing (QE) are not about to be ditched. The preferred solution seems to be to crank up the dosage, this time in the form of negative interest rates. Since 2014, when we saw the novelty of negative bond yields for the first time, there are now more than $5tn of government bonds with negative yields and a number of countries with negative policy rates. This perhaps reflects the impact of QE and the extent of deflationary expectations.
Ongoing low borrowing costs clearly have some merits from the perspective of registered providers, who are borrowers rather than (financial) investors. But the traditional cynicism about free lunches should persist, in our view. There is the ongoing inflation in property and land values which, for anyone trying to deliver new homes, somewhat counteracts the low interest rates on new debt (and, along with historical gearing and other covenants, undermines confidence in actually making full use of the low rates). But at a more general level we would see the broad possible outcomes as follows:
• The Central Bankers were right after all: they engineer a soft landing and then economies reach escape velocity with monetary policy gradually normalised.
• Developed economies all turn Japanese for a prolonged period with ultra-low or negative interest rates, low or negative growth and periodic bouts of QE.
• Central Bankers turn out to be slightly less clever than they thought, and their attempts to create ‘a little bit of inflation’ get out of hand, with disorderly currency debasement, inflation and a dramatic sell off in government bonds.
In terms of housing sector fund raisings: capital markets issuance has been looking rather sorry since summer 2015 and activity has been more focused on ensuring that short-term liquidity requirements are met, largely through the bank market. Clearly the raft of policy changes impacting housing associations has created a long pause and much of our work over the last few months has been supporting strategic decisions, whether that is merger-related activity or more generally.
Our view is that some associations will recover confidence in the traditional business model while others will make bigger changes to their organisational structure and activities. But in the same way that associations who are able to think and act strategically will put themselves in a better place, similarly those investors who are able to offer a wider range of products will likely reap some reward for that effort.
2Economic
update
5 Spring 2016Contents
Economic update – markets, rates and general confusion
2. Economic update
Key market indicators August 2015
September 2015
October 2015
November 2015
December 2015
January 2016
1 month LIBOR (%) 0.51 0.51 0.51 0.50 0.50 0.51
3 month LIBOR (%) 0.59 0.58 0.58 0.57 0.59 0.59
5 year 6ML swap (%) 1.61 1.42 1.49 1.40 1.59 1.15
30 year 6ML swap (%) 2.22 2.07 2.14 2.00 2.16 1.79
5 year 1s6s LIBOR basis (bps)
21 21 20 20 20 21
30 year gilt yield (%) 2.58 2.47 2.62 2.53 2.67 2.35
iBoxx 15y+ A Coll. Spread (bps)
183 194 193 198 191 211
iBoxx 15y+ AA Coll. Spread (bps)
167 177 179 184 178 197
iTraxx bank 5y senior CDS (bps)
81 96 70 68 77 91
FTSE 100 6,248 6,062 6,361 6,356 6,242 6,084
Bank of England base rate (%)
0.50 0.50 0.50 0.50 0.50 0.50
Commodities August 2015
September 2015
October 2015
November 2015
December 2015
January 2016
Nymex Oil (US$) 45 45 47 42 37 34
Gold (US$) 1,134 1,115 1,142 1,065 1,061 1,118
Bps: basis points; COP: consumer price index; HIP: house price index; LIBOR: London Interbank Offered Rate; RPI: retail price index; YoY: year on year.
Table 1. Selection of market metrics
The following table (Table 1) shows a selection of general market metrics. The falls in long-term rates are readily apparent at the 30-year point,
but note also the offsetting up-tick in margins on capital markets debt, which investors are not shy of flagging in pricing discussions.
6 Spring 2016
Introduction1
Contents
The Homes and Communities Agency (HCA) Global Accounts – housing associations rising to the challenge
HCA Global Accounts
3
Headlines from the Global Accounts 2015The HCA’s Global Accounts provide a financial overview of the social housing sector based on HCA analysis of the regulatory financial returns of private registered providers.
Traditionally this information has been released in March, around the same time as Finance Conference, but housing associations’ current status as Public Non-Financial Corporations has required a new approach for 2016.
The Office for Budget Responsibility must now take housing association borrowing and debt into consideration when providing the Chancellor with the official state of the nation’s finances. With the next set piece event being the Budget announcement on 16 March, the HCA brought forward the publication of Global Accounts accordingly.
The analysis includes the financial performance of the 332 providers who own or manage at least 1,000 social homes, representing more than 95% of the sector’s stock.
According to the HCA, “the 2015 Global Accounts demonstrate that the sector delivered a solid year of balance sheet growth, underpinned by a financially robust operating performance.”
Key statistics were:
• turnover: £16.2bn (+4.1%)• value of housing properties: £138.1bn (+£7.1bn)• external debt: £63.4bn (+£4.1bn)• surplus: £3.0bn (+£661m)
• social units developed: 46,000 (+35%)• number of social homes managed at year end:
2,647,395 (+0.9%)• investment in new supply and existing stock:
approximately £5bn.
Ratios were:
• operating margin: 28.3% (2014: 26.5%)• net margin: 18.5% (2014: 15.0%)• gearing: 98.1% (2014: 96.2%)• debt to turnover: 389.4% (2014: 379.2%) • debt per unit: £23,931 (2014: £22,598)• percentage turnover generated by non-social
housing activities: 5.4% (2014: 6.3%) • percentage surplus generated by non-social
housing activities: 5.7% (2014: 5.0%).
Statement from David Orr, Chief Executive of the National Housing FederationHousing associations reinvest their surpluses back into new homes and services for their tenants. Because they have made efficiency improvements, associations are better equipped to deal with the challenging financial years ahead. Housing associations delivered 50,000 homes last year – one third of all new homes in the country. Despite an increasingly difficult operating environment, the sector remains committed to boosting the nation’s housing supply and improving the lives of tenants.
7 Spring 2016Contents
3. HCA Global Accounts
Surpluses: an explanationSurpluses represent income generated minus total expenditure incurred during the year. Despite a number of policy challenges in recent years, housing associations have faced a relatively benign macro-economic climate and this has in part contributed to increases in annual surpluses. These surpluses are vital to safeguarding the long-term viability of housing associations as independent organisations with a key role to play in delivering the new homes this country needs.
Surpluses have also grown as housing associations have undertaken more commercial activity, such as houses for outright sale, student accommodation, and market rent accommodation. These activities are often delivered through wholly-owned subsidiaries with the profits then transferred to the charitable parent through Gift Aid.
This model allows charitable associations to cross-subsidise their core social housing operations with the funds generated by commercial activity whilst remaining true to their charitable purpose and minimising Corporation Tax liability. The upshot is a 217% increase in Gift Aid (£157m) compared to 2014. Housing associations are diversifying their businesses in order to support the Government’s wider housing objectives and contribute towards solving the housing crisis. Market sale and market rent activities deliver more high-quality homes for the country whilst generating profits that can be reinvested in affordable homes.
Sector surpluses have increased in line with housing association asset values, as housing associations raise more money via debt and utilise their own internal reserves. This shows that housing associations are investing in their assets by delivering new homes and improving their current stock, and that they are doing so by utilising their own resources instead of government funding. In fact, in 2015 housing associations invested double the sector surplus figure into their properties.
The sector currently holds around £51bn of long-term debt on its balance sheet, and surpluses are vital to paying back the debt, attracting new investment, and safeguarding the long-term future of organisations that house and support over five million people.
Housing association case studies: what have they done with their surpluses?
Waqar Ahmed, L&QIn 2014/15, L&Q made a £209m surplus completing 2,031 new homes, half of which were affordable housing. This level of surplus enabled us to invest £500m cash into new homes for both rent and sale, as well as £71m in major works to our existing homes. In the current year, 2015/16, we expect to hand over 2,500 homes and are targeting handovers of 5,000 per year by 2020.
We saw a 2% increase in operating margin from social housing lettings from 43% in 2013/14 to 45% in 2015/16, with a target of 50% by 2020, as a result of an efficiency drive and delivering on various value for money (VfM) initiatives.
Notable VfM initiatives include:
• direct maintenance rollout in two of our seven neighbourhoods
• £12m investment in new IT systems in areas such as customer relations, service charges, and lettings to further improve our services and deliver even further efficiencies.
Heather Ashton, Thirteen GroupIn 2014/15, Thirteen made a £22m surplus, completing around 600 new homes, the majority of which were affordable housing. This level of surplus enabled us to invest £65m into new homes for rent and sale as well as £49m in major works to our existing homes. In the current year, 2015/16, we expect to hand over 350 homes and are targeting handovers of 450 per year by 2020.
We saw a 4% increase in operating margin from social housing lettings from 20% in 2013/14 to 24% in 2014/15, with a target of 30% by 2020, as a result of an efficiency drive and delivering on various VfM initiatives.
Notable VfM savings as a result of our recent merger included £3.3m through staffing efficiencies, £1.16m on procurement of new contracts, and £0.6m on contract renewals. £1.3m savings were also achieved through the provision of in-house legal services.
8 Spring 2016Contents
3. HCA Global Accounts
How and why have surpluses increased?This year there were four main drivers for the increase in surplus of £661m:
1. Inflationary increases in social housing letting income (up 4%, an increase of £163m)
This is to be expected as housing associations have responded to the Government policy by delivering increasing numbers of rented housing at affordable rent levels. These rents are typically higher than traditional social rents.
In addition, housing associations had previously agreed a long-term rent settlement with the Government, which saw rents increase by a maximum of Consumer Price Index (CPI) +1% per year. The 2015 Summer Budget overturned this agreement by introducing a 1% annual rent cut starting in 2016. We would therefore expect to see social housing letting income fall in next year’s Global Accounts.
2. Increased margins on social housing letting activity (from 30% to 31%, contributing an extra £169m)
This shows how committed housing associations are to working efficiently and delivering greater VfM. They have responded to welfare reforms by streamlining their operations and focusing on VfM. Improving the margin on core social housing activity means housing associations can dedicate more resources to added value initiatives such as employment schemes, health and wellbeing support, and investment in communities and neighbourhoods.
3. Increase in Gift Aid (up by 217% or £157m)Gift Aid has increased because housing associations are now doing more commercial activities (such as houses for outright sale, market rent accommodation, student accommodation, and social care). Gift Aid is how commercial subsidiaries of housing associations transfer their profits back to their non-profit parent organisations.
Housing associations are diversifying their businesses in order to support the Government’s wider housing objectives and to contribute towards solving the housing crisis. HCA analysis of consolidated group accounts, which importantly includes activities undertaken by non-registered subsidiaries, shows that non-social turnover for the year was £2.4bn, returning a surplus of £402m (16.8% margin). 4. Fair value adjustments (up by £191m)This seems like a large number but it is actually an accounting adjustment that has come from internal restructures at a small number of housing associations. The restructures changed the valuation of properties from historic cost to ‘existing use value – social housing’ (EUV-SH), which is a higher figure. Stock valuation within the sector remains in a state of flux due to government policy and regulatory changes, and it will be interesting to see how associations respond in the future.
Sharp eyed readers will notice that these four contributors do not add up to £661m. The remainder of the surplus increase was brought about by smaller items such as surplus on the sale of fixed assets and changes in net interest costs.
9 Spring 2016
Introduction1
Contents
Deregulation and reclassification
4Reclassification and deregulation – in the interests of privacy
Amendments to the Housing and Planning Bill, which would see a considerable reduction in the amount of regulation housing
associations are subject to, were announced in December 2015. These amendments were intended to address concerns identified by the Office of National Statistics (ONS) when it reclassified housing associations as public non-financial corporations. Following the reclassification, the Government made an immediate commitment to bring in changes necessary to prompt the ONS to reverse this decision and take them back off the public balance sheet, and the deregulatory amendments to the Bill are designed to do just that.
Since then, the Federation has been working closely with members, the HCA and the Department for Communities and Local Government (DCLG) to understand the implications of such a change to the regulatory environment and ensure that potential unintended consequences are identified and mitigated
As a brief recap, the deregulatory amendments will:
• remove the disposal consents regime• remove the constitutional consents regime• remove the Disposals Proceeds Fund• amend the regulator’s ability to appoint officers• make the introduction of Pay to Stay voluntary
for housing associations• introduce a new Special Administration Regime
(SAR) for insolvent housing associations.
These proposals have been discussed in significant detail elsewhere, but there are two specific issues that remain live which we expand on here.
Housing associations registered with the Charity CommissionA significant number of housing associations are registered charities, meaning that they are regulated by the Charity Commission in addition to the HCA. This is of relevance to the removal of the HCA’s disposal consents regime.
Under the current regime, housing associations regulated by the HCA that are also registered with the Charity Commission do not need to seek consent from the Charity Commission when disposing of assets. However, with the removal of the HCA’s regime this will no longer be the case and, as things stand, moving forward associations registered with the Charity Commission will need to comply with the Commission’s disposal consents regime.
It should be noted that Co-operative and Community Benefit Societies, which account for the majority of non-profit registered providers of social housing, are exempt charities and are not therefore subject to Charity Commission regulation. Full details of the Charity Commission regime can be found in this publication.
The Federation is concerned that this has the potential to increase the regulatory burden on affected organisations, delay the implementation of active asset management strategies, and overwhelm the resources available to the Charity Commission. We are therefore working with colleagues at the Charity Commission, the HCA and DCLG to explore solutions that would continue to protect charitable assets whilst ensuring charitable housing associations also benefit from the deregulatory agenda.
10 Spring 2016Contents
4. Deregulation and reclassification
We are also aware that the Law Commission has a project underway looking at charity law, including the requirements around property disposals and consents. The Commission consulted last year and is expected to announce its recommendations at the end of 2016. We will be monitoring this situation with interest.
Special Administration RegimeThe introduction of a SAR for housing associations has been on the regulatory agenda for a number of years, particularly in the wake of occasions where the regulator has felt that its ability to bring about a rescue has been hindered by short timescales and unclear processes. Considering the increasing complexity and diversity in the sector, it has been recognised that the existing regime may not provide sufficient time to arrange a successful rescue.
The SAR will allow the regulator, via the Secretary of State, to appoint a Housing Administrator in the event of a housing association entering into insolvency. The Housing Administrator will have authority over all aspects of the organisation and will be required to develop and implement proposals which meet the objectives of the SAR.
The design of the SAR, as originally published, contained a number of issues which may have had negative consequences for housing associations. DCLG has subsequently been in discussion with the Federation, valuers, and lenders to the sector to seek solutions that will satisfy all parties. Further amendments to the Housing and Planning Bill, due to be published soon, will hopefully alter the SAR in order to achieve this.
Table 2. Changes to the Special Administration Regime (SAR)
Issue Impact Resolution
The primary objective of the SAR was unclear; on the one hand it appeared to be to ensure social housing assets remain within the regulated sector, whereas on the other hand the regime relied upon the Insolvency Act 1986, which requires the interests of secured creditors to be prioritised.
This had the potential to undermine existing approaches to security valuation in the sector by calling into question lenders’ ability to access, and realise the value of, their security.
The primary objective of the SAR regime will be to safeguard the interests of secured creditors. Where possible this will be done within the regulated sector.
The SAR regime was open ended. Unclear how long the regime would last and therefore how long creditors would have to wait until they could access their security.
The SAR will now last 12 months in line with the ordinary administration regime contained within the Insolvency Act.
No mention of debt servicing during the SAR.
If creditors are not confident that outstanding debt will continue to be serviced during the SAR, they may respond by raising the cost of borrowing and introducing more stringent conditions and covenants.
A debt servicing requirement will be included in the SAR.
Confusion between the new SAR and the extension of ordinary administration to Co-operative and Community Benefit Societies (CBS).
It was unclear why ordinary administration needed to be extended to CBS’ if the SAR would take precedence.
Ordinary administration will no longer be extended to CBS’, which are registered providers.
11 Spring 2016Contents
4. Deregulation and reclassification
The implementation of the SAR will depend upon the Housing and Planning Bill receiving Royal Assent. The Bill is currently at the committee stage in the House of Lords and is likely to be subject to considerably more debate and discussion before becoming law. It is therefore very difficult to put a definite timescale on when the SAR will come into force.
It is also near impossible to predict how various stakeholders will react to a change as large as the introduction of a new insolvency regime for the sector. As described above, we have been in dialogue with a number of parties to try and identify and mitigate issues before the SAR becomes law, but this has all taken place within very tight timescales driven by the Government’s legislative agenda.
The Federation will continue to engage with lenders, valuers, the regulator and the Government once the SAR has been finalised in order to monitor the impact and continue to communicate member’s views and experiences – particularly any relevant negotiations or discussions with lenders. However, it will also be important for members to be proactive in liaising with their own legal representatives and lenders should any issues arise.
The true test of whether the SAR was necessary, and whether the eventual design of it correct, will come if and when it is tested for the first time.
12 Spring 2016
Introduction1
Contents
Deregulation and valuers
5Deregulation – what does it mean for valuations?
The Government’s current proposals to deregulate the housing sector puts us on the brink of
fundamental changes to both disposal and constitutional consents. With those will come much greater freedom for housing associations. In addition, the Government is proposing to introduce a SAR to deal with potential insolvencies.
The Government’s proposals are still emerging as amendments to the Housing and Planning Bill as it goes through the parliamentary process. The Bill is still open to change and we cannot, therefore, give definitive views on exactly what the changes will mean for registered providers and the valuation of their assets. But we can set out how we see things today in the light of the draft legislation as it currently stands.
Our job as valuers is to interpret and reflect the behaviour of a market into opinions of value. The housing associations who are reading this article are, in large part, that market. Thus, the way in which housing associations behave in future will have a bearing on the value of their assets, be that for accounts purposes, stock rationalisation, asset management or loan security.
Many things are not changing:
• the HCA’s regulatory standards (at least, not yet)
• the HCA’s principles by which it regulates and the mechanics for doing so
• the HCA’s viability and governance ratings, and ability to impose fines on transgressing registered providers (albeit these have never yet been used)
• the Royal Institution of Chartered Surveyors (RICS) valuation bases by which valuers must work
• and, most importantly, the constitutions and charitable objects of housing associations, which collectively define the ethos of the sector.
Against that background, a number of important things are changing:
• the HCA’s disposals consent regime will be swept away, including Section 133 of the Housing Act 1988
• the HCA’s constitutional consents regime will also go, affecting mergers, subsidiaries and group structures.
We also, of course, have the changes around the rent cuts imposed by the Welfare Reform and Work Bill; Voluntary Right to Buy; voluntary Pay to Stay; and other government policies, with a clear drive towards home ownership.
This will all have a bearing on how registered providers behave in the new world. As valuers, we have to consider the impact of these changes in the context of the two bases of value used in the sector: Market Value and Existing Use Value for Social Housing (EUV-SH).
13 Spring 2016Contents
5. Deregulation and valuers
The definition of Market Value, which is universally accepted, will certainly not change. In the loan security market, the concept and the underlying assumptions of Market Value subject to the existing tenancies (MV-T) are well established and reflect a commercial approach to asset management on the part of the purchaser. Thus, in the absence of a consent regime, the questions for valuers become: ‘would an association sell on this basis?’ and ‘would an association buy on this basis?’
In contrast, the removal of the consents regime presents some interesting challenges to the current definition of EUV-SH. The definition of EUV-SH, as laid down by the RICS, guides a valuer in forming an opinion of what one housing association would pay for the tenanted stock of another. This applies whether the stock is purchased directly from the other registered provider or from a mortgagee in possession; and on the assumption that it would continue to be let at a rent affordable to those on low incomes.
The question is: does the removal of the consent regime mean that the definition of EUV-SH will have to change? The important thing here is to keep the definition relevant in the context of how the market behaves. As it stands, we believe the behaviour and objectives of the vast majority of housing associations will remain broadly unchanged. However, the new freedoms may encourage more liquidity within the sector in terms of active asset management.
We think housing associations will continue to behave in a distinctive way in terms of how they transact real estate between each other; and hence the concept of EUV-SH will remain, but in an amended form. However, before recommending any amendments, we
valuers are going to look carefully at how the sector embraces these new freedoms and whether housing associations do alter their collective behaviour.
Many stakeholders in the sector will be watching closely to see how associations and other stakeholders respond to the legislative and regulatory changes and to the questions we pose above. The funders collectively have some £70bn at stake in terms of drawn or committed loans; institutional investors who are bond holders have about £20bn more; and the credit rating agencies, who have currently taken a relatively benign view of the changes introduced since the 2015 Summer Budget, are also watching closely and have a critical influence.
It is clearly vital that the flow of private finance into the sector, through both debt and investment, is encouraged to continue and given an environment in which it can do so reasonably safely. But, at the same time, there is no doubt that housing associations are being expected to run greater commercial risks in their business plans and to adopt a more pro-cyclical approach to the delivery of multi-tenure housing.
That will inevitably create greater risk and, alongside the rallying cries from the National Housing Federation urging the sector to ‘be bold’, comes the need for measured governance of the highest standard. There may be housing associations that do not get the balance right, and that is why the Government’s current proposals for the introduction of a SAR are also of critical importance.
In the meantime, we would welcome comment from housing associations in response to the questions we pose in this article.
14 Spring 2016
Introduction1
Contents
Voluntary Right to Buy
Voluntary Right to Buy – an update
6
The Federation is working closely with members and with the Government, via a Sounding Board and specialist
working groups, to develop the Voluntary Right to Buy (VRTB). As you are aware, this is a large and complex process and many aspects of the scheme are still in the early stages of discussion.
To ensure you have the latest information as it becomes available, and can input fully into the development of the scheme, notes from the Sounding Board and working groups are available on our website.
We will be publishing some new briefings and information over the next few weeks covering the original VRTB agreement, the design of the scheme, key dates, the Federation’s role in this work, and the decision making process we’re working to. These will be published in our member-only VRTB update email, which you can sign up to here.
In the meantime, there is an important issue to highlight on compensation. We have received clarification and confirmation that discounts offered to tenants under VRTB will be fully reimbursed by the Government.
The Housing and Planning Bill makes provision for grant to be paid to housing associations as compensation for the VRTB discount. The terms of the grant-making power in the clause will enable it to be considered a revenue grant, so it will be sufficient to treat the grant as income for accounting purposes. A statement to this effect was made by the Housing Minister Brandon Lewis in the House of Commons and is therefore part of the Hansard record. Any future debate or confusion over the terms of compensation can refer to this record in order to clarify the ministerial intention.
If you would like to discuss this work in more detail or get involved in the development of VRTB, please get in touch.
15 Spring 2016Contents
Introduction1
Consumer credit regulations
Stringent new consumer credit regulations
7
HM Treasury (HMT) has laid legislation before Parliament that will change the consumer
credit regime for housing associations operating in the UK.
The changes apply to housing associations that:
• hold mortgages or other loans secured on land
• are not first legal charges or mortgages • were entered into before 1 April 2014.
The most common type of loan affected will be equity stakes offered to customers, such as those provided through the Open Market Home Buy scheme. The law change means that the administration of these loans will now be considered a ‘regulated activity’ for which full consumer credit authorisation from the Financial Conduct Authority (FCA) will be required.
This legislation was first announced in January 2016 and comes into effect on 20 March 2016, thus there has been very little time for affected organisations to arrange for the correct permissions to be in place in order to ensure ongoing compliance.
The FCA has recognised this and introduced an extended interim permission option, which increases the amount of time housing associations have to achieve compliance. This is a welcome development, as carrying out regulated activities without the correct authorisation
is illegal and would have exposed affected organisations to potential legal, reputational and regulatory risk.
Next stepsThe FCA has published new information for housing associations in relation to this change, on housing association permissions and legislative changes affecting housing associations.
It is important that housing associations carry out a full review of their pre-April 2014 loans to check whether any will be regulated and to confirm whether they are affected by this issue. Some organisations have withdrawn from the FCA application process because these types of loans were not previously covered by regulation. For them, this legislative change will mean that their regulatory position needs to be reassessed.
Housing associations that do not currently have authorisation for exercising lender’s rights under a regulated credit agreement, and have no current interim permission for this purpose, should read the housing association permissions and apply for interim permission. The process is simple and applicants are only asked to confirm:
• their organisation and contact details• their previous OFT licence number• that they hold a relevant back book
of loans• that they intend to apply for full
authorisation in relation to the back book of loans.
16 Spring 2016Contents
7. Consumer credit regulations
Housing associations whose applications for alternative authorisation (e.g. for debt counselling) have either been concluded or are currently being considered – but who have not made an application for authorisation for exercising lender’s rights – should apply for interim permission using this route.
In order to obtain this new extended interim permission, housing associations do not need to demonstrate that they previously held an interim permission but they do need to confirm that they previously held an OFT licence which included Category A (Credit) and that they will need authorisation in relation to their back book of loans going forward.
Organisations who are currently within their application window and who are affected by this legislative change will not be entitled to apply for the new extended interim permission and will need to adapt their applications to include the category of exercising lenders rights. For some organisations this will involve a shift in the level of authorisation they were planning to apply for and may involve a reworking of any applications which are to be submitted in the next few weeks.
Timescales• applications open now• 20 March – new law comes into effect• 31 March – closing date for applications
for extended interim permission• 30 June – closing date for submitting
application for full permission.
17 Spring 2016
Introduction1
Contents
8FRS102
Financial Reporting Standard 102 and financial instruments – the devil is in the detail
The interpretation of the appropriate accounting treatment can hang on a single word, or, it has been known, the use or
otherwise of a comma in the relevant financial reporting standard. A bit of bad drafting can have significant unintended consequences on the required reporting and can result in many hours of debate across the accounting and auditing profession. Often these unclear areas are not identified until significant numbers of entities try to apply them in real life.
We are currently in the middle of a move to FRS102, a completely new accounting standard that is being tested en masse for the first time. Historically, the world of accounting has drawn upon precedent and consensus achieved over time (often published by the standards board as additional guidance on specific topics), with the change to a new standard this has been lost overnight.
Significant time has been spent by many preparing for FRS102, trying to identify areas where more clarity is needed in advance. Nowhere is this more significant than in relation to financial instruments where, for example, classification as basic or non-basic can result in dramatic differences. And yet the expectation that this process will result in a short shopping list of treatments that one can easily ascribe to an instrument is flawed. In the housing sector we are used to solutions that are neat and easily replicable and this will not be the case for a number of reasons:
• The devil is in the detail – only when you have the detail of the agreement and the standard can you determine an appropriate treatment. A high level comparison to someone else’s review is not sufficient.
• Materiality applies – it may be that a particular treatment is appropriate for one organisation because a more complex application does not result in a material difference.
• It’s not black and white – judgment is critical in the treatment of an instrument and there can legitimately be different interpretations by different associations that may or may not be agreed with their auditors, at least until further clarification or consensus appears later down the line.
The important thing to bear in mind is that there may be some convergence of views over time (particularly where the difference arises from the final bullet point above) and there will be entities who may need to restate or change disclosures as a result (this is true of all of FRS102, not just the financial instruments elements).
Should this happen there will be those who ‘backed the wrong horse’ – i.e. agreed on a treatment that is not where the consensus lands. It is important for everyone involved to bear this in mind in future years and not to look for those to blame (e.g. assuming the finance director ‘got it wrong’) but understanding that this is a necessary effect of the evolution of accounting and reporting.
The following article by Jenny Brown of Grant Thornton, and Jonathan Pryor of Smith and Williamson (members of ICAEW’s Social Housing Panel), highlights the potential differing approaches to the reporting of financial instruments under Financial Reporting Standard 102 (FRS102) and the need for an appropriate degree of perspective when comparing these complex accounting disclosures.
18 Spring 2016
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The strong relationship between housing associations and the Financial Reporting Council
The Financial Reporting Council
9
Housing association representation on the Financial Reporting CouncilFollowing governance changes at the Financial Reporting Council (FRC), the Committee on Accounting for Public-benefit Entities (CAPE) has been disbanded. CAPE had been responsible for considering accounting issues related to social housing and Rob Griffiths, Chair of the Housing Statement of Recommended Practice (SORP) Working Party, had attended as an observer.
In discussions with the FRC the Federation expressed the view that it would be helpful for the housing sector to remain engaged on key issues to do with financial reporting. This point was acknowledged by the FRC as they had already recognised the importance of financial reporting to key stakeholders due to the amount of private finance raised through investors and banks.
A second emerging point was the potential for changes in government policies (e.g. the rent cut in England) to have a significant impact on financial reporting for housing associations. As well as being open to separate discussions on the impact of key issues on housing association accounts, the FRC has recognised the importance of the sector by nominating Rob Griffiths as a member to the FRC’s Technical Advisory Group. This nomination was endorsed by the Accounting Council at the end of February for a three-year term.
SORP-making Body Annual Review 2015At the end of 2015 the Housing SORP-making Body submitted an Annual Review of the SORP-making process to the FRC. This document explains the governance arrangements of the Body and discusses the financial reporting issues which have been considered during the year.
The document can be accessed here.
19 Spring 2016
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Good governance – what to expect from in-depth assessments and the Federation’s new voluntary code on mergers
Good governance
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In-depth assessments – an advice note for housing associationsIn June 2015 the HCA set out some key changes to their regulatory approach, including the introduction of in-depth assessments (IDAs) for housing associations with 1,000 homes or more.
IDAs will take an in-depth look into housing associations’ businesses to ensure they are complying with the economic standards, with a particular focus on the association’s viability (their ability to meet financial obligations) and their governance. The HCA piloted this approach with 12 housing associations between February and August 2015 before it was rolled out to the whole sector in the autumn.
The Federation has worked with the pilot associations and the HCA to produce an online resource to give you an overview of the IDA process so you know what to expect from the assessment, and to provide some advice about how best to prepare. It covers the following topics:
• what IDAs are and where they fit into the regulatory process
• an outline of the assessment process• the areas the assessment will cover• steps you can take in advance to ensure
you’re prepared for the assessment when it happens
• practical tips to help you effectively manage the assessment
• top tips from the pilot housing associations who’ve already been through the process.
There will also be a session at our Finance Conference on Wednesday 16 March focused on IDAs, where you will be able to hear from the HCA and some of the pilot housing associations directly to get a first-hand account of an IDA experience. In addition, staff from associations who have been through the IDA process will be on hand to share their experiences at drop-in sessions in the exhibition hall.
If you have any questions please contact Ruth Jacob, [email protected].
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10. Good governance
Mergers, group structures and partnerships – a voluntary code for housing associationsThe Federation has published a voluntary code on mergers, group structures and partnerships, which is intended to support members looking to improve or review their governance structures and arrangements. At a time when the sector is under increasing scrutiny from the Government and the media it is vital that boards are able to demonstrate best practice with regard to their decision making processes, structures and responsibilities.
Deregulatory measures announced by the Government mean that housing associations will no longer have to seek consent from the regulator to alter their constitutions or organisational structures, or when seeking to initiate mergers and acquisitions. Although notification to the regulator will remain, the fact is that it will now be up to boards to approve or deny constitutional changes, which could have far reaching consequences for their organisation.
The publication of the merger code is therefore timely. It is a resource that our members can choose to use in order to demonstrate the importance they place on good governance and the standards that they have chosen to set for themselves. We know that a lot of associations have long-established governance procedures that they regularly review and update, and the code is not intended as a replacement. Its objective is to provide an independent framework, which associations can apply to their own specific needs in order to assure their stakeholders of good practice.
The code concentrates on the early stages in a partnership process. It covers the manner by which organisations consider and determine if partnership options, merger or group structures are in the interests of beneficiaries and long-term business objectives, and should be fully and formally explored.
Adopting and complying with the code can help demonstrate how an organisation has acted:
• in considering how it is placed to meet its long term objectives
• in conducting its decision-making processes around potential partnerships, group structures and mergers
• in demonstrating compliance with aspects of codes of governance and the HCA’s Regulatory Framework
• in demonstrating transparency and accountability to its beneficiaries around informed decision making on the delivery of its purpose.
The code covers:
• an exploration of what is meant by partnership models, mergers and group structures
• an illustrative process map for working through a merger, group structure or partnership proposal
• ten principles of good practice:1. The role of the board is to act in the
best interests of the organisation. The whole board remains accountable to its stakeholders for informed decision making in the best interests of the organisation and its beneficiaries.
2. A board should review its purpose and values statement regularly to consider if the intent is clear and specific enough to allow the board to determine how best to continue to fulfil its objectives.
3. Where merger, group structure or partnership opportunities emerge, the whole board should be informed promptly. The parties should agree a process and timeline for the consensual development of first stage proposals, in order that respective boards may properly evaluate the opportunity and make an informed and timely decision.
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4. Decisions on merger, group structure or partnership proposals must be presented to and decided upon by board(s). In considering any proposal, a board should have access to sufficient written information to reach an informed in principle decision to explore or reject merger/group structure/partnership dialogue. Information provided at the first stage should include a written proposal with enough material to allow the board to consider the overarching suggested intent of a combined business or partnership, and the perceived financial, strategic and tactical implications for their respective organisations.
5. Boards should ensure they have, or have access to, the specific skills and experience necessary to objectively evaluate the merits or otherwise of merger, group structure and partnership proposals. Where the board does not have such specific skills it should seek impartial advice on the implications of the proposal.
6. No board member or member of the Executive should behave in a way which could frustrate due consideration of a first stage proposal by the whole board. This
includes failure to present/discuss approaches with the board, dismissal of an offer without due consideration or withholding information that is integral to a decision.
7. The board’s decision on a first stage proposal should be documented and communicated to the other party (parties) in writing.
8. Once a first stage proposal has been agreed in principle by the board, a process and timetable for next steps should be agreed in writing by both parties.
9. Following approval of the first stage proposal and intent to proceed, an outline business case should be prepared which will include disclosure of financial and non-financial undertakings and target efficiencies/undertakings to be realised as part of the merger proposal.
10. Once the code is adopted it is expected that boards will declare this each year in their financial statements, VfM self-assessment or annual report, and that they will, each year, keep a record of activity under the code including any proposals reviewed or submitted along with the outcome of these.
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Efficiency and VfM
11Efficiency and VfM – the Federation’s programme of work
Peer learning groupsThe Federation has initiated a series of peer learning roundtables to provide forums for senior housing association officers to identify key issues currently facing their organisations and collaboratively devise solutions. Almost 60 members have chosen to participate in this work, with initial sessions taking place during January 2016.
The first sets of roundtables are due to conclude in June 2016 at which point an evaluation will be undertaken. If the initiative is deemed successful the Federation will explore opportunities to expand this work further.
To date, the roundtables have chosen to focus on the following topics:
• maintaining core purpose whilst adapting to a changing environment
• change and leadership• staff attraction and development• collaboration and partnerships• commercial and growth opportunities• technology and innovation• reshaping care and support• governance• new relationships and key stakeholders.
If you would like to be involved in similar work in the future please contact Octavia Williams, [email protected]
State of the sector with HousemarkHousemark is established as the sector leader in providing benchmarking and analysis services for those wishing to compare various performance indicators and statistics across a range of housing associations. The Federation has teamed up with
Housemark to develop a ‘State of the Sector’ report that will utilise this data to provide commentary on current and historical performance, and efficiency, across the breadth of the sector.
This report will not identify individual organisations but will instead consider a range of variables that may be relevant to disparities in performance and efficiency. The intention is for this work to inform debate on efficiency in the sector, and to provide a baseline from which additional priorities can be established.
VfM self-assessmentsThe Value for Money Standard may now be an established part of the Regulatory Framework, but associations continue to take very different approaches to their self-assessments, both in terms of format and content. On the one hand, this is to be expected as the Value for Money Standard is not prescriptive and it is up to individual organisations to decide what VfM means to them and how they wish to assess their performance. However, this sits within the wider sector conversation on efficiency and VfM and it is therefore important that the self-assessment is evidence of a robust approach to VfM and communicates a compelling message to stakeholders.
The Federation is therefore exploring how members could be better supported in this regard, and would welcome feedback from members on successes and challenges in implementing VfM across the business and creating a strong annual self-assessment. We will also be engaging with consultants, the regulator, and other stakeholders to gain a better understanding of good practice with a view to creating a briefing or blog which may assist members in getting the most out of the annual VfM self-assessment process.
23 Spring 2016
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Pension update
Pension update
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Could taxation reform be a tipping point for housing pension schemes?Last year’s Summer Budget was equally as momentous for pensions as it was for housing. While the housing sector saw the announcement of 1% rent decreases and Pay to Stay, the pensions industry was thrown into uncertainty as the Chancellor George Osborne announced a review of pension taxation. After consultation with the industry, it was expected more would be announced in the Autumn Statement, but pension reform was a no show. All eyes are now on 16 March.
The driver for reform is that, in this time of continued austerity, the £50bn a year of pension tax relief has long been considered a target of this Government – in the context of other limited savings opportunities it might be considered an easy win. And having now invested so much time into the consultation, anticipated pension taxation changes are likely to be significant.
The likely outcome is a move to a single rate of tax relief and the impact will be felt primarily by middle earners. Currently, for those earning more than £42,385, it costs 60p to put £1 into their pension. For basic-rate taxpayers, it costs 80p to put £1 in. With a single (or flat) rate of tax relief, the basic rate taxpayer will be better off, which can only be welcomed, but middle earners will see relief fall – meaning that for 60p, they will likely only get 80–85p put into their pension. To continue getting that £1, middle earners will have hundreds of pounds less in their pockets.
So this will certainly affect a large swathe of the population, but what’s the direct impact for housing associations? At first sight it is the pension schemes that will have an enormous challenge of administering and communicating these changes, which will be extremely complex. And, while impact will be felt on both defined contribution and defined benefit schemes, it will be far more significant for the latter.
It is likely that defined benefit schemes will have to carry out a valuation of the increase in benefits, akin to the annual allowance calculation, for every member in every scheme. This will be used to assess the tax charge or credit in respect of the member. The scheme will pay or receive the charge or credit, and the member will receive a ‘scheme pays’ style adjustment to their benefits each year. Evidently, administering all of this will be expensive, difficult and may mean that defined benefit arrangements no longer represent value for money.
With many housing associations still operating defined benefit schemes, most under Local Government Pensions Schemes or Social Housing Pension Schemes, the sector is very exposed to pension taxation reform. Finance directors might prefer defined contribution scheme for financial reasons, but come 16 March human resource (HR) directors might find that the value that defined benefit schemes add to reward packages are reduced, perhaps tipping the sector towards defined contribution. The fact of the matter is that with more change likely for the housing sector as
KPMG will be running several sessions at our Finance Conference on pensions. Of particular interest will be the session on Thursday 17 March interpreting the Budget announcements from the previous day.
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12. Pension update
a whole, a change in the pensions landscape will only bring additional challenge, so while jumping the gun isn’t advisable, an informed and planned approach certainly is.
Has the time come to harmonise?Housing associations are well known for championing equality, whether that be for their tenants, within their communities, or for their staff. However, there is an area where inequality is on the rise, albeit not purposefully, and that area is pensions.
There was a time when many housing associations offered all of their staff defined benefit schemes, but over the years many have started to bring in defined contribution schemes for their new starters. Such an approach has been driven primarily by financial reasons within the organisation, but has led to increasing questions about fairness from the staff.
For those associations that made the changes to defined contribution a few years ago, the majority of their staff are now on a defined contribution scheme, but those who have been there longest may still be on a defined benefit scheme. While this situation could be viewed as loyalty towards those who’ve stuck with the association, it doesn’t necessarily reward those who are high performers. in fact, the opposite could be true.
The brass tacks is that you could have two people doing the same job, in the same team, earning the same salary, but with what is essentially a totally different reward package. And right there is where you have a two tier workforce – the antithesis of equality.
Now, the point of this piece isn’t to say that the answer is a choice between defined benefit and defined contribution – the point is to think about how disharmony between the two can impact on
your staff. We know that in their HR departments, associations are thinking hard about how to increase engagement through equality and, in turn, how to deal with equality of reward. Pensions are clearly a huge part of the reward package. And, frankly, equality should be enough of a reason to think about pensions, but when coupled with the increasing financial pressures that associations now face, it equates to an agenda for change.
Of course, there’s more than one way to skin a cat. For some who have started a transition, it could be a case of reviewing those who are still on defined benefit, looking at the potential retirement dates, and either sticking with the status quo or shifting them over to defined contribution (and dealing with the inevitable fall out). But for some, it will be a harder choice.
Some associations, typically Large Scale Voluntary Transfers (LSVTs), will have everyone on defined benefit, and this may still feel like the right choice – it certainly ticks the equality box. However, the other factor for change – financial pressure – means it could be an unsustainable situation. So, do you start new joiners on defined contribution, or do you move everyone at once? The latter is unlikely, but the former brings the equality question back into the frame.
The key is being an employer of choice and choosing to be that kind of employer. It’s understanding that employees don’t have to work for you, and in fact the best employees need to be wooed. With more merger activity likely, that’s perhaps even truer – where harmonisation of benefits is required, being that employer of choice is tricky but also vital to keep your best people. And so, the time for sitting on the fence when it comes to equality in pensions has gone. Put simply, the need for equality has always been there, but financial pressures have made that need all the more pressing.
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Apprenticeship levy
13The apprenticeship levy and employment taxes
The apprenticeship levy, announced in the 2015 Summer Budget, is a new levy on large UK
employers. The levy is intended to fund apprenticeships, in support of the Government’s aim to deliver 3 million new apprenticeships by 2020. The levy will be introduced from 6 April 2017 and will apply to employers across all sectors regardless of whether they have apprentices.
Key features of the new regime• The levy is to be set at 0.5% of an
employer’s pay bill where the annual pay bill is in excess of £3m and will be collected through Real Time Information (RTI) via PAYE.
• The pay bill is the total amount of earnings liable to employer’s Class 1 National Insurance Contributions (NIC), including earnings below the secondary threshold (£8,112 for 2016/17). Similarly, where the age related employers NIC percentage is zero, for example for employees under the age of 21, such earnings are included in calculating the pay bill.
• The pay bill excludes most benefits but includes items such as vouchers etc., which are subject to Class 1 NIC.
• Each employer will receive a single annual allowance of £15,000 to offset against their Levy payment, this will mean the levy is only payable on the excess of an annual pay bill over £3m.
Using the fund for apprenticeshipsEnglandEmployers who pay the levy will be able to draw on their contributions in the previous two years to fund qualifying apprenticeships for their own staff, subject to funding limits. They must use a digital voucher system and utilise an approved training provider. It is anticipated that it will be possible for employers to utilise a higher level of funding than the amount of Levy paid; the mechanism for accessing additional funding has not yet been determined.
Rest of the UKApprenticeship funding is a devolved policy area, therefore Scotland, Wales and Northern Ireland will set their own policy on the funding of apprenticeships.
No employer’s Class 1 NIC on apprentice earnings from 6 April 2016From 6 April 2016 there is a 0% rate of employer’s NIC on payments made to qualifying apprentices under the age of 25 who are employed under government-recognised apprenticeships in the UK; i.e. following apprenticeship frameworks or standards.
The exemption will apply up to the Upper Earnings Limit (UEL), which will be £43,000 per annum for the 2016/17 tax year.
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What do employers need to do now? Many employers will face an increase in employment costs from April 2017 as a result of this new levy. It is important to take action now to consider the cost of the levy and the opportunity to take advantage of the new apprenticeship funding which will be available in 2017 and the 0% rate of employer’s NIC from April 2016.
Next StepsAssess the impact of this new payroll tax on your business, including the following:
• Calculate your pay bill and identify whether the levy will apply.
• Identify current apprentices under the age of 25 and consider if the arrangements under which they are engaged qualify for the 0% rate of employer’s NIC. If so, start thinking about changes that may be required to payroll systems and processes so you can comply with all aspects of this new legislation and payroll tax.
• Consider if any existing learning and development programmes could be tailored to meet the qualifying criteria as apprenticeships for the new NIC exemption.
• Assess current training arrangements, including apprenticeships, to consider if they will meet the requirements to access funding for apprenticeships from the new levy; this will require qualifying training programmes delivered by approved training providers.
The draft legislation has provided clarity on many aspects of the apprenticeship levy and how this will work in practice. Further guidance on all aspects, including application of the 0% NIC rate and the funding of apprenticeships is expected to follow in the coming months.
More informationOn 22 February 2016, HM Revenue & Customs published the 2016 version of its tax guide Expenses and Benefits. The aim of the guide is to explain the tax law relating to expenses payments and benefits received by directors and/or employees.
You can also listen to the Deloitte Dbriefs webcast on the forthcoming apprenticeship levy.
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Taxation
Taxation
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Changes to the reduced rate – housing associations protectedFollowing discussions between Deloitte, the Federation and HM Revenue and Customs (HMRC), the Autumn Statement included details of the legislation to be included in the Finance Bill 2016 to give effect to the Court of Justice of the European Union decision in Case C-161/14 that the UK was not entitled to apply the lower rate to installation of energy-saving materials in residential property. The changes will take effect from 1 August 2016, subject to transitional arrangements.
Reduced rating will in future apply to:
• Services of installing energy-saving materials in residential accommodation where the materials are not supplied by the installer.
• Services of installing energy saving materials, including the supply of the materials themselves, if:• the supply is made to a person over
60 years old or on certain benefits• the supply is made to a relevant
housing association• the building in question is used for
a relevant residential purpose.• Services of installing energy-saving materials,
including the supply of the materials themselves (other than services and materials falling within the second bullet point above) in residential accommodation, provided the cost of the materials does not exceed the cost of the installation services. If the cost of the materials is greater, only the installation element will be subject to the reduced rate and the materials will be standard-rated.
The legislation will withdraw, from the same date, the application of the reduced rate to solar panels, wind turbines and water turbines. Read the policy paper in full.
Allpay – additional VAT cost A large number of housing associations will have faced an increased VAT cost from 1 December 2015 on charges raised by companies that collect rents and other payments on their behalf. An example of such a supplier is Allpay. The additional VAT liability arises because HMRC consider the charge to be for debt collection.
Ruling and implicationsFrom 1 December 2015, HMRC have ruled that services such direct debit and debit/ credit card acceptance transactions are standard rated for UK VAT purposes. This is based on the European Court’s judgement in Axa Denplan, where debt collection services were defined widely (i.e. to include the above services) and held to be a taxable service.
As a result of HMRC’s ruling, the VAT is likely to be irrecoverable, as it is directly attributable to exempt rent.
Next steps• confirm that you are not recovering the VAT• confirm whether VAT is payable on top or
whether the charge is VAT inclusive• assess whether there are other services that
should remain VAT free.
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Events
Big things coming – Federation events
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Housing Association National Accountancy Awards 20165 July 2016, LondonThe Housing Association National Accountancy (HANA) Awards, now in their fourth year, were launched by the Federation to recognise excellence in housing association finance.
The HANA Awards celebrate the most pioneering and innovative finance teams and individuals in the social housing sector. The winners will be announced at the lunchtime awards ceremony on 5 July 2016 at the Raddison Blu Portman Hotel in London.
2016 Award Categories:
• Finance Team of the Year• small/medium• large
• Most Effective Risk Management Approach• Outstanding Financial Communications• Financial Innovation• Best Newcomer• Best Value for Money• Best External Professional Advisor• Finance Director of the Year
• small/medium• large
• Best Board Report• Outstanding Lifetime Contribution• Treasurer/Treasury Team of the Year• Innovation in Financial Technology/Software
The deadline for submitting entries is Friday 1 April 2016. To submit an entry, visit the HANA Awards nomination page.
Treasury Management Conference 20166 October 2016, London The housing association business model is being turned on its head:
• a faster turnover of cash will come to the fore as sales of property through VRTB kick in and increasing diversification replaces rental income
• deregulation will mean housing associations now taking full responsibility for the management of their assets
• new covenants will have to be agreed as a result of FRS102 implementation.
This will all have a profound effect on housing association treasurers, and the ability to successfully manage and mitigate the risks stemming from these changes will be central to the future viability and success of housing associations.
The Treasury Management Conference is our annual event for staff and board members wishing to hear the latest from a range of professionals involved in treasury and finance.
Some of the topics covered on the day:
• an examination of treasury management in the new operating environment – more cash, more sales, different security requirements, and new types of finance
• an exploration of the possibilities and risks arising from off-balance sheet development
• hear the credit rating agencies’ perspectives on the social housing sector and the dramatic changes it is undergoing.
More information is available on the Housing Treasury Conference website.
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Diary dates
Big things coming – Federation events
16Dates for the diary
Details of upcoming events at the Federation can be found on our website.
Table 3. Upcoming events at the Federation
Date Event Location
4 April 2016 New Board Member Briefing Session London
14 April 2016 HR in Housing Conference and Exhibition London
19 April 2016 New Board Member Briefing Session Cambridge
27 April 2016 National Voluntary Right to Buy Conference London
26 May 2016 Affordable Home Ownership Conference London
14 June 2016 Company Secretaries’ Conference and Exhibition London
5 July 2016 Housing Association National Accountancy Awards London
The National Housing Federation is the voice of affordable housing in England. We believe that everyone should have the home they need at a price they can afford. That’s why we represent the work of housing associations and campaign for better housing.
Our members provide two and a half million homes for more than five million people. And each year they invest in a diverse range of neighbourhood projects that help create strong, vibrant communities.
National Housing FederationLion Court25 Procter StreetLondon WC1V 6NY
Tel: 020 7067 1010Email: [email protected]: www.housing.org.uk
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