ADHS11 - Tax and legal consultancy services for a restructure of the OPDC group

1.1 As part of its Land Assembly Programme, OPDC has acquired c£200m of land assets, some purchased directly by OPDC and others acquired by purchasing a Special Purpose Vehicle (SPV), a company which owned the land.

1.2 This has resulted in a more complex corporate structure which has added an administrative burden, increased risk of accounting error and increased risk of tax liability. OPDC wishes to engage an accounting and tax consultancy to simplify the structure and reduce the risk.

1.3 As far as possible, processes and controls for the assets owned by SPVs fall under OPDC’s normal course of business, with asset management, rent collection, insurance and health and safety following the same processes as those assets held directly by OPDC. In some areas, additional processes and controls are required to meet statutory obligations, and to better manage the assets.

1.4 In addition, there are interactions between OPDC’s tax position and the tax position of each SPV which need to be considered.

1.5 This advice should save costs by streamlining the group structure. This should reduce the number of SPVs but only after a careful review process covering the tax, legal and governance implications.

2.1 OPDC intends to run a workshop with the consultant’s tax team, along with OPDC management, to run through OPDC’s group structure and to work through scenarios. Following this they will provide written advice on how the OPDC group can be restructured to save both third party costs and internal staff time. Depending on the complexity of the restructuring that is recommended, further advice may be needed but this will only be determined after the workshop.

2.2 Given the complex legal and tax questions that will need to be assessed, OPDC does not have the appropriate internal knowledge and skills to carry out this work internally.

2.3 Consultancy support will be procured in line with OPDC’s Contracts and Funding Code.

3.1 Following the advice, OPDC will need to implement the proposals in order to simplify the structure, reduce the number of SPVs and save money.

3.2 OPDC currently spends approximately £50,000 per year on external professional costs to carry out the accounting and tax services for the SPVs. In addition, OPDC is likely to make VAT savings.

3.3 There should also be significant internal savings on OPDC staff time, with less management time required to review the accounts and tax returns, and prepare board minutes and meet statutory obligations.

4.1 This proposal is an important part of the stewardship of OPDC’s land and property assets. As the custodian of a major regeneration area and being a large landowner, it is essential that OPDC manages the finances of these assets.

4.2 The advice and implementation of the advice will also simplify OPDC’s offer when working with developers in future years to regenerate the Old Oak area.

5.1 As part of the procurement exercise OPDC will agree clear timetables and deliverables for the project.

5.2 The Project Lead will be the Senior Finance Business Partner and the Senior Responsible Officer will be the Head of Finance.

6.1 This work will ensure that OPDC reduces the complexity of its corporate structure, saving time and money.

6.2 It will also reduce the risk for the directors of each SPV as they will have fewer statutory responsibilities if the number of SPVs is reduced.

6.3 Risk of additional costs arising will be mitigated through production of a clear brief for the appointed consultant and careful management of outputs to ensure the restructure is delivered within the agreed budget.

7.1 OPDC must have ‘due regard’ to the need to eliminate unlawful discrimination, harassment and victimisation as well as to the need to advance equality of opportunity and foster good relations between people who share a protected characteristic and those who do not.

7.2 The protected characteristics and groups are: age, disability, gender reassignment, pregnancy and maternity, race, gender, religion or belief, sexual orientation and marriage/ civil partnership status. Fulfilling this duty involves having due regard to: the need to remove or minimise any disadvantage suffered by those who share a protected characteristic or one that is connected to that characteristic; taking steps to meet the different needs of such people; and encouraging them to participate in public life or in any other activity where their participation is disproportionately low. Compliance with the Equality Act may involve treating people with a protected characteristic more favourably than those without the characteristic. The duty must be exercised with an open mind and at the time a Decision is taken in the exercise of the OPDC’s functions.

8.1 Simplifying the corporate structure is integral to long-term investment considerations as we prepare to engage the market for partners to bring forward the Old Oak scheme. This will act as one of many steps that enables us to effectively ascertain our capacity to deliver inclusive and sustainable development.

9.1 There are no other considerations that need to be considered in the taking of this decision.

10.1 No one involved in the preparation or clearance of this Form, or its substantive proposal, has any conflict of interest.

11.1 There is sufficient budget in account 542000 Management & Support Consultancy to cover these costs.