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The COUNCIL begs leave to report to the University as follows:
1. Under Statute G, II (Financial relations between the University and the Colleges) every College is required to make a yearly contribution out of its revenues to the University. The Statute sets out in detail how the contribution (a fraction of the College's net assessable income) is to be determined. This University contribution is used to augment the endowment of the less well-off Colleges through the Colleges Fund.
2. The Council has received from the Colleges' Committee a proposal from the Fees Sub-Committee of the Bursars' Committee to reform the current system of University contribution. Under the revised system assessment would be based on the capital assets of Colleges and a specified total sum would be raised each year (the amounts to be paid by individual Colleges then being determined through the assessment system). This would ensure an appropriate and steady flow of funds to the poorer Colleges. The proposal has been unanimously endorsed by both the Bursars' and the Colleges' Committee.
3. Although the purposes of University contribution have evolved since the present system was set up in the 1920s, the basis of assessment has not. The system has been modified in points of detail over the years, but it has been clear for some while now that more radical revision was needed to turn it into a fair and acceptable tax in the context of College finances and investment 80 years on. That perception has become general with the move by Colleges to a total return policy, which eliminated the distinction between income and capital on which the traditional system of contribution is based.
4. In 2004, the Fees Sub-Committee of the Bursars' Committee consulted the Colleges on a reform of the system under which assessment would be based on the capital assets of Colleges and not on income assessed under the traditional system. The responses to that consultation showed that Colleges overwhelmingly favoured change and since then the Fees Sub-Committee have been developing their proposals and have been collecting the necessary accurate information on capital values through the Recommended Cambridge College Accounts (RCCA), the new form of College accounts.
5. The structure of the proposed new system is as follows:
6. The proposed amount to be raised for the Colleges Fund at 2006-07 values is £3m, and that sum will be indexed (by the Higher Education Pay and Prices Index) going forward. This compares to sums raised in recent years of approximately £3m (in respect of the year 2005-06), £2.8m (2004-05), £2.6m (2003-05), and £2.7m (2002-03) (the totals in respect of the years 2004-05 and 2002-03 included voluntary contributions from Trinity College of £300,000 and £500,000, respectively). Based on current values, the lower and upper band divisions occur at approximately £30m and £80m, respectively, of a College's assessable amount. The standard rate of contribution will be about 0.13% and the higher rate will be double that.
7. On current values, seven or eight Colleges have assessable amounts extending into the higher-rate band, and those higher-rate Colleges will together pay more than 85% of the total contribution. Over two-thirds will come from Trinity and St John's together, and over half will come from Trinity alone. Ten Colleges will be below the contribution threshold.
8. Using estimated figures based on the RCCA for 2003-04, 2004-05, and 2005-06, the following table [Table 1] shows a comparison of the assessable amounts of the several Colleges for those years, shown in decreasing order of assessable amount as a percentage, and the percentage contribution that would have been due under the new system.
Eight Colleges in 2003-04, and seven in 2004-05 and 2005-06, would have fallen into the top band for contribution, and ten would have been in the lowest band and therefore no contribution would have been due in their case.
9. Using the same estimated figures, the table on p. 374 [Table 2] shows a comparison of the contribution payable under the present system in respect of those years (but actually paid in the following years), and the contribution that would have been payable under the proposed new system.
The sums shown above do not include the voluntary contribution by Trinity College of £300,000 which was paid in the year 2005-06 in addition to the assessed contribution payable by the College for the year 2004-05.
10. The Council concurs with the view of the Colleges' Committee and the Bursars' Committee that Statute G, II and Schedule G should be amended to achieve the aims set out in paragraph 5, and in the Annex to this Report sets out a revised Statute and Schedule. The Council, before signing its Report, consulted the Colleges to ensure that they were content with the proposed changes. The Council has agreed that the new system if approved should take effect from the calculation of contributions for the accounting year 2007-08 (contribution payable in 2008-09) and are of the view that the working of the revised Statute should be reviewed after a period of five years.
11. As a consequence of the proposed revision to Statute G, II the Fees Sub-Committee, after consultation with the Technical Sub-Committee of the Inter-Collegiate Committee on College Accounts and the University Director of Finance, have recommended that the tax computation should be separate from the Colleges' principal financial statements. This will necessitate amendments to Statute G, III and to Statute T, 54 as set out in the Annex.
12. The Council recommends:
I. That, subject to the approval of Her Majesty in Council, the Statutes of the University be amended as set out in the Annex to this Report and that these amendments be submitted under the Common Seal of the University to Her Majesty in Council for approval.
II. That, subject to the approval of Recommendation I, Regulation 1 of the regulations for the Colleges Fund (Statutes and Ordinances, p. 946) be amended by replacing the reference to Statute G, II, 13 by reference to Statute G, II, 18, with effect from the date on which the amendments of Statute are approved by Her Majesty in Council.
III. That, subject to the approval of Recommendation I, the regulations for College Accounts (Statutes and Ordinances, p. 950) be amended by inserting the following Regulation 3, with effect from the date on which the amendments of Statute are approved by Her Majesty in Council:
3. The index referred to in Schedule G in relation to College contributions under Statute G, II shall be the Higher Education Pay and Prices Index (all).
|10 December 2007||ALISON RICHARD, Vice-Chancellor||S. J. COWLEY||DAVID SIMON|
|TONY BADGER||BOB DOWLING||VERONICA SUTHERLAND|
|NICK BAMPOS||S. ENSOR-ROSE||LIBA TAUB|
|W. BORTRICK||M. FLETCHER||JOAN M. WHITEHEAD|
|NIGEL BROWN||DEBBIE LOWTHER||RICHARD WILSON|
|WILLIAM BROWN||D. W. B. MACDONALD||S. J. YOUNG|
|M. CLARK G.||A. REID|
Proposed amendments to Statutes G, II, G, III, and T, and Schedule G
By amending Chapter II so as to read:
1. Every College in the University shall make a yearly contribution, which shall be applied to the purposes hereinafter prescribed.
2. The following items shall constitute the assets of a College:
|(a)||all property, real and personal of whatsoever nature, held by the College, or held in trust for the College;|
|(b)||all property held by the College or by or with any other trustee or trustees on trusts any of the purposes of which concerns the College;|
|(c)||all property held by a subsidiary of the College;|
|(d)||any business of the College, as defined in section 4; and|
|(e)||(considered as assets of negative value) all liabilities of the College or of a subsidiary of the College.|
But the assets and liabilities relating to any occupational pension scheme registered for income tax purposes shall not be included in the assets of the College.
3. (a) The following assets of a College shall constitute its operational assets:
|(i)||all interests in land within the precincts of the University held mainly for Collegiate purposes by the College;|
|(ii)||all tangible personal property held mainly for Collegiate purposes within that land; and|
|(iii)||any asset approved as an operational asset by the Finance Committee, having regard to the use of the asset for Collegiate purposes.|
(b) With the approval of the Finance Committee,
|(i)||a vacancy or temporary use of an asset shall be disregarded; and|
|(ii)||a College may declare an asset to be non-operational.|
(c) For the purpose of this section,
|(i)||a purpose is to be treated as beneficial notwithstanding that the beneficiary may make payment or give any other consideration for the benefit received;|
|(ii)||any matter ancillary to a Collegiate purpose shall be treated as included within that purpose; and|
|(iii)||where different parts of an asset are held for different purposes, those parts shall be treated as separate assets;|
|(iv)||subject to the approval of the Finance Committee, a right held by a College to repayment of a loan made by it in connection with an interest in land may be treated as an interest in land within the scope of subsection (a)(i); and|
|(v)||for the purpose of subsection (a)(ii), the term 'Collegiate purposes' shall include purposes associated with a business of the College.|
4. A business of a College shall mean any activity that involves the use of the operational assets of the College conducted or permitted by the College or by a subsidiary of the College with a view to deriving income other than from the College or its members, whether or not that activity falls within the charitable purposes of the College.
5. The assessable assets of a College shall comprise all of its assets except (i) its operational assets, and (ii) assets held by the College or by or with any other trustee or trustees on trusts approved by the Finance Committee as being exclusively for non-Collegiate purposes.
6. The assessable amount of a College, in respect of any year, shall be the value of its assessable assets on the valuation date. The valuation date shall be the last day of the accounting period for the preceding year. A change in the accounting period for a College shall require the approval of the Finance Committee.
7. In the case of a trust partly for Collegiate and partly for non-Collegiate purposes, the value of the assets of the trust in respect of any year shall be taken to be the value at the valuation date of the whole assets of the trust multiplied by the Collegiate distribution for the accounting period for that year divided by the income for that accounting period. For the purpose of this section, in relation to a trust,
|(a)||the Collegiate distribution for an accounting period means the amount applied from the trust during that period for Collegiate purposes or transferred from the trust to the College during that period, not including any amount approved as a capital distribution by the Finance Committee for the purpose of this section; and|
|(b)||the income for an accounting period shall not include any additions to the trust during that period, and shall not include any gain of a capital nature during that period except to the extent that the computation of income of the trust is in accordance with a rule approved by the Finance Committee for the purpose of this section.|
8. The value of a business of a College in respect of any year shall be derived from a notional operating surplus equal to the turnover of the business during the accounting period for that year multiplied by a defined percentage, which notional operating surplus is then capitalized for a yield of 4% (or such other figure as may be determined by Ordinance). For the purpose of this section,
|(a)||turnover shall mean total revenue after deduction of Value Added Tax (or any similar deduction approved by the Finance Committee) and before any other deduction therefrom, but shall not include any revenue derived from the College or its members;|
|(b)||the defined percentage shall be determined according to the nature of the business concerned and shall be such figure as the Finance Committee consider to be an appropriate estimate of the profit normally to be expected from a business of that nature, where profit means the turnover less the costs of the operation of the business, not including any costs relating to the operational assets of the College; and|
|(c)||where a business involves the use of both operational assets and other assets of the College, an apportionment shall be made, by a method approved by the Finance Committee, to determine its value in relation to the use of operational assets only.|
9. The Finance Committee shall make, and may vary from time to time, rules for the purposes of this chapter. Without prejudice to the generality of the foregoing, such rules may include provision for
|(a)||the valuation of assessable assets that are in use in part only as operational assets;|
|(b)||the valuation of assets that are owned jointly by the College and some other person or persons;|
|(c)||the submission of information and evidence by Colleges in connection with any matters concerning this chapter;|
|(d)||the disregard of businesses of a specified nature and the reduction (whether for business of a specified nature, or in relation to income, or otherwise) of the profit percentage defined under section 8;|
|(e)||the set off of assets and liabilities between the College and a subsidiary of the College;|
|(f)||the variation of the valuation date for certain classes of assets; and|
|(g)||the certification of the value of assessable assets.|
Such rules shall include provision for the disregard of a business established as a school for the supply of Choristers to the College.
10. The Finance Committee may obtain professional advice in connection with any matter concerning this chapter. The cost of such advice shall be paid from the Colleges Fund.
11. The Finance Committee may give written notice to a College of its intention to review the contribution payable by the College in respect of any year. Such notice shall specify the year in respect of which it is given, and shall be given not later than the end of the accounting year sixth after the accounting year for the year in respect of which it is given. But later notice may be given where the intention of the Finance Committee is based on facts of which it was previously unaware and could not reasonably have been aware. Any such later notice shall specify the facts on which it is based and shall be given not later than three months after the Finance Committee first became aware of those facts. No notice shall be given later than the end of the accounting year twelfth after the accounting year for the year in respect of which it is given. A notice given under this section may require the submission of such information and evidence as is specified in the notice in connection with any matter concerning this chapter. A notice shall state a time by which any information and evidence specified in it, and any representations in relation to it, shall be received from the College.
12. After considering the information, evidence, and representations received from the College within the time stated in the notice (or within any extension of time allowed), the Finance Committee shall conduct its review and shall determine the contribution due from the College in respect of the year concerned. Such determination shall be binding and effectual for the purposes of this chapter, but may be varied by the Finance Committee after further review made on the application of the College. After conducting a review, the Finance Committee may require payment by the College to the Colleges Fund of all or any part of the costs incurred by the University in the review.
13. The Finance Committee may agree with a College the nature, valuation date or value of any of its assets. Such agreement may be unconditional or subject to such conditions as the Finance Committee may determine. Such agreement shall be terminable at will by the Finance Committee, provided that such termination shall not affect the contribution payable by a College in respect of any year the accounting period for which has then passed. An agreement may be made notwithstanding any conflict with rules made by the Finance Committee under this chapter.
14. In making rules under this chapter, and in agreeing with a College under section 13 the nature, valuation date or value of any of its assets, the Finance Committee shall have regard to the desirability of achieving fair, reasonable, and administratively simple outcomes.
15. Any approval by the Finance Committee under this chapter may be given unconditionally or subject to such conditions as the Finance Committee may determine.
16. The contribution of a College shall be calculated in accordance with the provisions of Schedule G.
17. Every College shall pay to the University on or before 31 December following the end of the accounting period for a year one-half of the contribution calculated for that year, and the remaining one-half on or before 30 June next following.
18. The contributions of the Colleges shall be paid into a Colleges Fund. Payments from the Colleges Fund shall be made in accordance with the provisions of this chapter and, in accordance with Ordinances enacted by the University, for grants to the Colleges. Such grants may include investment for the benefit of a College in an amalgamated fund constituted under Statute F, III, 6 subject to such restrictions as may be prescribed by Ordinance.
19. If in the opinion of the Finance Committee inequity or hardship owing to exceptional circumstances would be inflicted upon a College by the enforcement of the provisions of this chapter, the University shall have power to remit or defer payment of the whole or part of the contribution of the College in respect of any year.
20. If there is any dispute between the Finance Committee and a College concerning any matter in relation to this chapter, the question shall be decided by the Council. Any College affected by the decision of the Council may, within six months after notice of the decision, appeal to the Chancellor or, if the office of Chancellor is vacant, the High Steward, who may affirm, reverse, or vary the decision.
21. Where a College becomes aware of any error in the calculation of its contribution, it shall notify the Finance Committee, who shall determine what correction (if any) should be made.
22. Where a correction or other adjustment is made to the assessable amount of a College in respect of any past year, the Finance Committee shall notify all of the Colleges of the changes to be made in relation to that year. Each College shall account for such changes in the accounting period in which notification is given.
23. In the interpretation of this chapter:
|(a)||holding, as regards property, means having (whether alone or with others) a legal or equitable interest in, possession of, or (where appropriate) occupation of the property, and held shall be interpreted accordingly;|
|(b)||the assets of a College shall have the meaning given by section 2, and ownership by the College shall be interpreted accordingly;|
|(c)||Collegiate purposes shall include|
|any purpose beneficial to the Head, Fellows, officers or employees of the College (whether currently or formerly) as such,|
|any purpose beneficial to resident members of the College as such,|
|any purpose directly conducive to operation of the College as a place of education, religion, learning, and research (or of any of those things),|
|but shall not include|
|subject to the approval of the Finance Committee, any provision of benefits which are not granted by the College or by a subsidiary of the College, or|
|(v)||any provision of benefits to persons not within the scope of (i) or (ii) above;|
|and non-Collegiate purposes shall be construed accordingly;|
|(d)||a subsidiary of a College shall include any company, trust or other corporate or unincorporated body which is owned or controlled by or on behalf of the College, and for this purpose ownership shall include entitlement, directly or indirectly, to the benefit of at least one-half of the property of the subsidiary and control shall include entitlement, directly or indirectly, to appoint, control or influence at least one-half of the persons having the general control and management of the administration of the subsidiary, but shall not include any company, trust or other body excluded from this definition with the approval of the Finance Committee;|
|(e)||the accounting period for any year shall be the accounting period the last day of which falls in that year; and|
|(f)||the Finance Committee shall mean the Finance Committee of the Council.|
By amending section 3 and inserting a new section 5 so as to read:
3. Except as provided by Statute T, 54, every College shall when preparing its accounts:
|(i)||have regard to the Recommended Cambridge College Accounts as determined from time to time by the University on the recommendation of the Finance Committee of the Council, made after considering the advice of the Inter-Collegiate Committee on College Accounts; and|
|(ii)||sgive a true and fair view of the state of affairs of the College at the end of the financial year and of the income and expenditure of the College for the financial year.|
5. Every College shall submit each year to the Registrary a return signed by its Auditor, in such form as shall be prescribed by the Finance Committee after consultation with the Inter-Collegiate Committee on College Accounts, showing the calculation of the payment due under Statute G, II. The University shall publish annually the returns of the several Colleges and financial statements for the Colleges Fund.
By amending section 54 so as to read:
54. The amendments of Statute G, III and the repeal of Schedules D and E made by Grace 1 of 6 August 2003 shall have effect in respect of the accounts of each College for such year as the College shall specify by notice addressed to the Registrary and for each year thereafter; provided that a College which has not given such notice shall prepare its accounts in the form that was required by Statute G, III on 1 October 2002, with such modifications relating to University contribution as may be approved by the Finance Committee. Such a College shall additionally submit to the Registrary a return signed by its Auditor, in such form as shall be prescribed by the Finance Committee, showing the calculation of the payment due under Statute G, II.
By amending the Schedule so as to read:
The contributions of a College under Statute G, II, 16 shall be calculated according to the following rules:
Each year the total of the contributions of the Colleges shall equal the sum of the net payment for the year, as notified by the Finance Committee, from the Colleges Fund of the costs of the University under Statute G, II, 10 and 11 and £3,000,000 multiplied by the multiplier for that year.
The multiplier shall be equal to the ratio of the value of an index in January immediately preceding the valuation date to its value in January 2006, that index to be determined by the University reflecting general economic circumstances.
In each year the assessable amount of a College shall be divided into bands. The first band shall comprise the assessable amount of the College up to 1.25% of the sum of the assessable amounts of all the Colleges for that year. The second band shall comprise the assessable amount of the College between 1.25% of that sum and the average assessable amount of all the Colleges. The third band shall comprise the assessable amount of the College in excess of that average.
No contribution shall be payable on the first band. The rate of contribution payable on the third band shall be twice that payable on the second band.
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Cambridge University Reporter 12 December 2007
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