Reply To: Management charges for central support costs

Peter Barker

This sounds like the provider’s own take on what is an industry standard practice. They identify all of their site-specific costs: core rent and services provided to the property. But the organisation has additional costs that are not incurred on this site: head office staff and premises etc. The conventional way to account for these central office costs is to slap a surcharge on everything else and 15% is pretty standard. How it is presented varies from one provider to another:

– some will have two separate figures, one in core rent and one in service charges
– some will build it into each line in the rent breakdown so you don’t see it separately identified
– some will show it as a single amount equal to 15% of the combined amount of core rent and service charges, which is what has happened in this case I think

As long as it is not funding ineligible services, it is eligible for HB. There are quite a few UT decisions about items that don’t fit easily into HB’s notion of what “services” are – see for example [2009] UKUT 28 (AAC) (sleepover staff room); CH/3528/2006 (voids and sinking fund, so probably the closest match for the issue in your case); and [2011] UKUT 0513 (AAC) (stairlift). The common theme is that if the item could just as easily have been subsumed within generic core rent, HB can cover it and it’s merely a question of presentation.

Allerdale discusses %age surcharges briefly. There was a dispute about how much of the EHM charge was eligible – this was a charge for services provided on site. The Judge had concluded that not all of the EHM charge was eligible because of some of it was personal support. That led to a secondary debate about whether any percentage-derived surcharges for things like voids and central admin are elastic and must rise and fall in proportion to the other items, or whether they are fixed charges once they have been set. The claimants were arguing that the surcharge should not reduce in proportion to the EHM charge because, even though it was initially arrived at by taking a percentage of the other costs, it was thereafter a flat amount of cash. But the Judge didn’t buy that: if some of the EHM charge was being disallowed as ineligible, that had a knock-on effect on the percentage based lines in the rent breakdown.