1. LEGAL STRUCTURES for LETS
The UK-LETS model views a LETS as a community-based
project. The LETS Info-pack provides a model Members Agreement
and Constitution similar to that of a community association, which
uses a democratic process to appoint officers who manage the scheme
on an honorary basis. They may in turn employ individual members
using LETS currency to carry out specific tasks, and sub-committees
as required. Such community-based mutuals are usually called
LETSchemes. However, some LETS are structured as a business,
ie they are owned by the individuals setting them up and the participants
are regarded as clients, as in mainstream Barter Networks - this
is analagous to the difference between a Building Society and
a Bank. These are usually called LETSystems and tend to
adhere to a set of rules laid down by the LETSystems Trust which
is closer to the original Canadian model - their ethos encourages
involvement with local mainstream businesses. However,
this distinction is by no means consistent or universally undersood
by LETS organisers. Only a detailed research programme would enable
us to ascertain exactly which legal structure LETS groups are
really using. Meanwhile the latest concept of a "social enterprise"
bridging these two models, and enabling a group of individuals
to work co-operatively but also have a stake in the scheme, invites
new legal structures to be developed - we will discuss this further
in the Members' Area.
2. Equal Opportunities
In general the constitution of a LETS scheme
will state that membership is open to all, regardless of age,
sex, sexual orientation, ethic origin, or ability. However, some
LETS groups will be aimed at a certain membership category, the
usual one being geographical location, but it could be a particular
interest area or section of the community, in which case this
should be clearly stated.
3. Data
Protection
The same provision applies as for all small organisations,
namely that where data is being collected for the specific purpose
of sharing information between members, the organisation does
not need to register with the Data Protection Authority.
4. Status of
LETS groups with the Inland Revenue
The LETS Group itself, as a non-profit-making community association,
is tax-exempt, ie its officers do not have to complete an annual
Corporation Tax Return on its sterling turnover.
5. Individuals'
LETS transactions and Tax
Trades which are not part of a member's normal business
will not affect their taxable income, eg a Computer Programmer
doing a massage for a friend, or a Masseur writing a computer
programme. LETS transactions which are part of a member's
normal business may be of interest to the Inland Revenue. However,
if the income and expenditure balance out (which is, after all,
what the LETS model is all about), there is no net profit
to report, unless the income comes from the business and the outgoings
are"personal drawings", ie if the computer programmer
earns local currency from writing software but spends it having
a massage. Having said that, most members will not be earning
anything above their tax allowance, so it is unlikely that their
income in local currency will impact on their tax situation. To
avoid any problem arising, members can have separate business
and personal accounts within the LETS, keep them both balanced,
and ensure that expenditure within the business account appertains
to the business. Where this is not feasible, ie where the member
is carrying out a substantial part of their business on LETS and
drawing from it for personal transactions, they may need to ask
for a proportion of their earnings on the scheme in sterling currency,
in the same way as they will usually charge sterling for materials
used, to cover income tax payments, so that they can declare this
income. People using LETS to launch new businesses may come into
this category, and where this applies to them, it will be part
of their success story that they were able to launch their business
in the real economy. NB Members themselves, not the LETS, are
responsible for their relationship with the Inland Revenue.
6. Standard of Work and Insurance Issues
The Constitution and Members Agreement places
the responsibility for transactions with members themselves rather
than with the local LETS organisation which acts only as an introduction
agency. It therefore follows that members themselves are responsible
for ensuring the person they are trading with provides appropriate
references and has their own insurance for professional work.
7. Department for Work and Pensions (DWP)
Many LETS members have self-sufficient life-styles
or as pensioners or housewives do not have contact with the DSS
(now DWP). Where individuals have interacted with the DWP, most
local officers have regarded their LETS involvement to be irrelevant
to their status as claimants, on the basis that whatever "currency"
is earned on LETS can only be spent within the membership of their
own LETS scheme and is not the same as money. LETSLINK UK has
provided LETS organisers with forms for their members to use when
trading, which the person "employing" them can sign
to say they are still available for work without notice being
given. Members are generally advised to work on LETS for less
than 15 hours a week, and it is unusual anyway for hours spent
on LETS work to approach this level. Particular specialised advice
should be provided by LETS organisers to members who are in receipt
of Disability Allowances who may fear that membership of LETS
could be interpreted as demonstrating an ability to work, but
in practice the hours of work are usually very limited and with
appropriate support can be described as "therapeutic work",
or the person can trade services which do not involve actual work.
When a group is funded and they contact the DWP, formal statements
have tended to adopt a robust tone, but in practice, the few individuals
experiencing difficulties, with help from expert members of LETS,
have successfully challenged the authorities. Further details
and case histories will be made available in the Members' Area
- meanwhile here is a copy of the Available for Work Form which
can be used to support claimants in their dealings with the DWP
- AVAILABILITY.
Press reports emphasising these issues under
headlines such as "Beating the System" were detrimental
to member recruitment, and Letslink UK therefore launched a campaign
to have the small print of the Benefits Legislation clarified.
Following negotiations from 1996 to 2000 with the Government (some
of the material is archived on this site), it was announced in
July 2000 that LETS transactions expressed as hours rather than
currency would be disregarded for benefits assessment. On this
basis, a variation of LETS which had been piloted by one of our
earliest member-schemes, "Fairshares", inspired by Professor
Edgar Cahn's Time Dollars model in the USA which encourages people
to help their neighbours in deprived inner-city areas and records
their transactions simply as "hours", was taken up by
New Economics Foundation, renamed as a Time Bank, and promoted
as "government-approved". However, LETSlink UK's own
research on LETS in 1995 indicated that many LETS schemes had
already adopted a "equal-time" policy, or where members
were charging varying rates per hour for their services were almost
all quoting a "standard-rate" per hour which members
could use if they wished to trade equal hours.
The fact that transactions are expressed as currency,
ie have a numerical value, in computer-based systems allows pricing
of locally grown produce, crafts, second-hand goods, and items
for hire - all important offers within the self-sufficient and
sustainable agenda to which most LETS groups aspire - be handled
in a logical way. Timebanks inevitably encounter the issue of
materially rewarding members for time spent working on the scheme,
ie the need to transact for goods using hours, and it has been
proposed to issue vouchers worth so many hours (similar to the
famous Ithica Hours scheme in New York State USA) which by default
come to adopt a certain value. Fixed-value vouchers have already
been piloted in several places by LETS groups - we believe the
first was the Portsmouth "Bennie" named after the Beneficial
Centre where LETSlink UK was based from 1979 to 1999 - to enable
rapid trading on "market-days" and to encourage participation
by socially excluded communities who are not familiar with the
use of cheques - see further discussions of these and other low-technology
alternatives in the Members' Area.
8. Developing the LETS model
New organisers of LETS schemes who are concerned about legal issues
should be aware that these differences are semantic and should
not deter them from setting up sensible accounting systems. One
approach, the doorway having been opened as far as legislation
is concerned, would be to pursue this to its logical conclusion
and obtain a benefits disregard for all LETS schemes and not just
some calling themselves by a certain name. LETSlink UK has recently
not had the resources to pursue the campaign, but with increasing
membership support, it could be taken up again. Meanwhile, in
order to ensure that members are covered in their interactions
with the DSS there is no reason why outputs should not be designed
to provide vulnerable members with the option of "hours accounting"
on their transaction records and this requirement should be high
on the agenda of those designing new accounting software. We do
know that a number of organisers are unsure whether to call their
schemes a LETS or a Timebank. Some are running a LETS and a Timebank
from the same office, and even sharing space with a Volunteer
Agency, which enables members to mix and match their participation
according to their circumstances. Others are actively pursuing
a hybrid model which is a more elegant solution. Proposed names
are a "Time LETS", a LETS Bank, or a LETTS (Local Exchange
& Time-Trading Scheme). Watch this space!
9. Organisational Structure of LETSlink
UK
LETSlink UK began as a small social enterprise in 1991 and developed
an informal network of client local schemes. In 1997 it became
a Company Limited by Guarantee with charitable aims implying that
schemes would formally became members of the organisation, but
the initial trustees did not fully implement the model, which
would involve the trustees being appointed by members, and regarded
themselves as the members with the schemes remaining as clients.
Later trustees discussed ways of implementing the Memorandum and
Articles of Association in a way which would involve the member
schemes more fully. Meanwhile local networks have become active
in some areas, whilst other areas need more support from the centre.
These matters will be actively addressed in due course by means
of internal research and discussion until a consensus is agreed.
MF/030929
