Internet Watch Foundation

·         Many funders and grant-making trusts are allowed (or choose) to only fund charities and this could open up complementary funding opportunities.

·         Charities have, for the most part, a good public image, and most people think of a charity as being "a good thing", so it may be easier to raise money or obtain co-operation and help as a charity.  Charities present an image of probity and credibility.

·         Mandatory 80% relief on non-domestic rates for property used wholly or mainly for charitable purposes and the possibility of up to 20% further discretionary relief.  Administration and management are classed as "charitable" when they are directed to the achievement of charitable objects.  Premises used partly for charitable purposes (including administration and management) and partly for other purposes (for example, use by Internet Watch as a trading subsidiary) are eligible for rate relief if more than half the use is charitable.

·         Exemption from income tax or corporation tax on profits or surplus and capital gains tax on gains from the sale of assets provided the profits are used wholly for the charity's purpose.

·         The right to claim basic tax on donations received from UK tax payers whether corporate or individuals made under gift aid.  Companies, including companies owned by a charity (in this case Internet Watch Limited), can make gift aid donations gross.  The company donates the full amount to the charity, including tax, and claims tax relief when calculating its profits for corporation tax.  Gift aid would also be used where a charity's trading subsidiary (Internet Watch) wishes to donate all its profits back to the charity (Internet Watch Foundation).

·         Donors do not generally pay inheritance tax on legacies to a charity or capital gains tax on assets donated to a charity.

·         Exemption from having to pay stamp duty on conveyancing.

·         Further advantages can arise in the area of VAT.  This is particularly likely if the charity has a trading or other subsidiary company.  Companies, but not trusts or unincorporated bodies, can be ‘grouped’ for VAT purposes, considerably simplifying inter group transactions.  Issues arise for charities and further advice should be sought before VAT grouping.

Our solicitors and accountants have advised that a number of these tax benefits can be backdated to tax year 2004/5.

 

At Funding Council, Board and EGM meetings in November and December 2004, a revised Memorandum and Articles of Association for IWF were approved and formed the basis of the application to the Charity Commission to become a registered charity.

In the interim the Commission has sought further information via telephone and letter from our legal representatives in connection with our application.  The Commission have sought clarification on:

·         The ownership and rental arrangements for IWF offices at East View.

·         Whether membership resulted in pecuniary or professional advantage.

·         How the IWF carried out its core business and whether takedown notices were universal.

·         Whether other advice and services were universal.

·         Whether the information provided to law enforcement agencies and the take down notices helped to solve and prevent crime.

The purpose of most of these enquiries was to establish that the IWF’s core functions are genuinely charitable and not a benefit in return for a subscription.

 

The Commission have accepted that the IWF’s work is charitable and have confirmed in writing that they are prepared to register our objects as:

 

(a)              The promotion of the care and protection of the health and welfare of the public in particular children and young people by working to minimise the availability of potentially illegal or otherwise harmful content on the Internet.

 

(b)              The prevention of crimes relating to offences involving exposure to illegal content on the Internet in particular by:

- operating a hotline enabling the public to report such instances;

- operating a notice and takedown service to alert hosting service providers of such criminal content found on their servers; and

-alerting relevant law enforcement agencies to the content.

   

(c)              To further such purposes as are recognised as exclusively charitable under the law of England and Wales

 

The objects in the Memorandum of Association approved at FC, Board and EGM and which formed the basis of our application to the Commission were:

 

(a)              The advancement of the protection of the public, including children, from exposure to content which appears to be illegal and is found on electronic communications media, including the Internet, but excluding content which appears to be illegal by reason of it infringing intellectual property rights. 

 

(b)     To undertake any charitable activity approved by the Board of Trustees.

 

·         One of the key requirements of being a charity is to protect the public and vulnerable groups from potential harm and some wording along these lines is standard in the objects of most charities.

·         The Commission removed the reference to copyright because protecting a copyright holder would not be a charitable object and as a registered charity IWF could not be expected to carry out such work.

·         In the Commission’s proposed object (b) they noted that IWF’s work contributed to crime prevention which is a charitable objective and they wished to see reference to this and to how IWF would carry out such work in the objects.

·         The Commission’s proposed object (c) means the same as object (b) in our original submission.

 

·        Our solicitor has commented that the Commission has accepted that the work of the IWF is charitable but have re-drafted a set of objects which are exclusively charitable and which they are willing to register.

·        The objects as drafted by the Commission allow some flexibility within charitable law should, for example, legislation change, the Board of Trustees wish to vary the remit or the IWF wish to access funds from charitable foundations.  The proposed flexibility avoids re-negotiating with the Commission in the future and having to re-register at Companies House.

·        With regard to the Commission’s proposed object (c), the solicitor has advised that since the Board of Trustees make the decisions about the activities of this charity through the IWF’s remit document, it is not necessary to restate “as approved by the Board of the Charity” so these words have been removed by the Commission.

·        Our solicitor has emphasised that the IWF had operated for eight years with extremely broad objects but it has been the approved remit document which has determined the role and activities of the IWF.  Under charity law this will continue to be the case. 

·        Any change to the IWF remit must be approved by Funding Council and by Board through a special vote (see below).  This requirement is now enshrined in IWF’s Articles of Association.  [Note: A special vote shall only succeed if at least 75% of the votes cast are in favour and at least one vote in favour is cast by a member nominated by the Funding Council. There is no casting vote at a special vote.]

·        The solicitor has also advised that the Commission is unlikely to make significant changes to their proposed objects for charitable registration and any small changes proposed to the Commission would take at least six weeks before even a response was forthcoming.

 

If the Commission were not minded to respond favorably by making any minor changes to the proposed objects which they are willing to register then the only option remaining to the IWF would be an appeal or withdraw the application.

 

We are advised that, given the positive response from the Commission and their proposed objects and the very clear understanding that the role and remit of the IWF is determined by the Board of Trustees, after proper consultation and via a special vote, there are no grounds upon which an appeal could realistically be contemplated. 

 

a) That the re-drafted objects by the Commission are endorsed by our stakeholders

b) That subject to due process, an EGM is called and the objects ratified.