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KC Plans Canine Centres Worth 4.5m Paid for by £12m Property Deal

THE KENNEL Club is considering buying sites up to the value of £4.5m to be used for ‘multiple canine activities’.
The money will come from the £12m the club has received from the sale of its property in Clarges Street, London, to developers British Land plc.
At a special meeting on December 12 members will be asked for views on the KC’s plans to spend the cash, which also include buying a freehold site, to a maximum cost of £4.5m, for a new office in Aylesbury to replace the current leasehold one; setting up a legacy investment fund of up to £3m to fund projects submitted by the dog community; and to give the KC’s pension scheme £720,000.
The KC says the principles whichthave been applied in consideration and proposal of the ‘resolutions’ are that they must be for the benefit of dogs, provide a lasting legacy, generate revenue rather than be an ongoing cost or liability, take account of the scope of the KC’s work and to be tax efficient.

Aylesbury office
It believes it is presenting a ‘balanced package of options’ for members’ consideration.
It wants to look into buying one or more sites up to a maximum cost of £4.5m in different locations to provide the activity centres, for use for a variety of disciplines, training and other canine activities.
It wants management and maintenance costs of such a centre or centres at least to break even on an annual basis so that each site is cost neutral.
The KC has two connecting offices in an office park in Aylesbury on which the lease expires in June 2019. The current rent is £100,000 a year, rates are £40,000 and running costs £50,000 which, the KC says, is ‘somewhat high due to the condition of the building’. The offices house the KC’s registration and data processing services, the call centre and Petlog, and are the club’s business centre, housing 80 staff.
Members will be asked whether the KC should buy a freehold property in the town ‘having explored the most commercially advantageous options’, or continue renting.
“It is considered that retaining the Aylesbury location is vital for business continuity, as key staff with specialised knowledge and skills are local,” the agenda to the meeting states.
“Experience of our previous relocation of the business from London to Aylesbury was that there was significant, negative impact on our business performance, it was costly and resulted in an 80 per cent loss of staff,” it goes on. “Further, the time required to retrain and recover the lost knowledge and skills exceeded two years.”
Options for existing buildings for refurbishment, new developments or sites exist currently in the town, the KC says. The project timescale is likely to be 29-42 months depending on the planning and design status of the land/property required.
“The purchase and acquisition costs will vary dependent upon the options available,” the agenda states. “The goal will be to produce a new, bespoke facility or purchase an existing building which can be adapted for the KC’s future requirements…
“Advice from our property consultants provides the considered opinion that an allowance of £4.5m plus VAT should be set aside to cover costs.”
Tax ‘rollover relief’ would be available on both these projects if unconditional agreements are in place by March. The objective of a legacy investment fund of up to £3m is to provide all involved in the dog-owning community the opportunity to apply for grant funding for projects which support the KC’s aims and objectives ‘including but not restricted to health and canine activity related projects’.
Tax of £697,000 would be payable, but the General Committee said it is in the interests of the dog world to pay an element of tax and have greater flexibility of use of the fund, which would not be the case if the fund was distributed through a trust.

Pension fund
The payment to the pension fund would attract tax relief, would be over and above the annual agreed contribution into the KC pension scheme and would reduce the future liability in terms of the pension scheme deficit which is currently £3m.
The notes to members say: “The KC must eventually eliminate this deficit. This payment would reduce the payments into the scheme by approximately £60k a year for the next 12 years and, therefore, release that money back into operating profits.
“This will potentially enable the availability of additional funds from operating profits to invest in KC activities. A payment of £720,000 would be a sensible and tax efficient way to utilise a proportion of the £12m.”
This payment would attract tax relief if made by December 31.
The KC says the £12m will be taxable in the 2013 account and payable in October next year at a rate of 23.25 per cent, £2.79 million, unless it is reduced by, ‘the firm intention to acquire land or buildings before March 2016 for which rollover relief can be obtained; payments before December 31, 2013 of any amount for additional contribution to the pension scheme; and payments before the same date of any amount to a charitable organisation’.

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