7  Use of Charitable Taxation Status of Contractor

In a non-HRA Project where a Registered Social Landlord (RSL) or Registered Provider (RP) is often involved in the Project to act as both the landlord to the tenants and the housing management contractor, it has been common for bidders to utilise the charitable taxation status of the RSL or RP (or to set up an SPV as an Industrial and Provident Society with the benefit of charitable taxation status) to offer a reduced Unitary Charge to the Authority (by not pricing taxation into the Unitary Charge).  This practice has, however, sometimes been coupled with a request for relief from the Authority should, due to a change in law, the charitable taxation status of that RSL, RP or SPV change during the concession period.  Whilst bidders may offer this position to Authorities (indeed it is to be encouraged as it will offer value for money) Authorities should not offer any relief in the Project Agreement for any change in law which may affect the charitable taxation status of the Contractor.  The position of HM Treasury on this particular issue is that no derogations will be permitted to the position applying generally to all PFI contracts as set out in paragraph 14.9 of Standardisation of PFI Contracts Version 4 (SoPC4).