The LETSystem Design Manual

4.0 The LETSystem - Legal Issues in the U.K.


Summary

* The LETSystem as designed conforms to the various requirements of legislation.

* All taxation regulations apply, to our benefit as well as to our detriment. Tax is liable on profits which obviously come from a business, a trade or a profession. Otherwise, for example with exchanges of a social nature, tax is not liable. Tax must be paid in sterling until the legislation is changed.

* The Social Security implications are confused and are subject to various interpretations from local benefits offices. Various strategies are presented in Section 4.3.

* Quality of any work done using the system, and the insurance issues arising, are the responsibilities of the parties engaged in the trade, and no-one else. As with tax, normal legislation and practices apply.

* The applicability of the Data Protection Act is unclear, but simple precautions on the part of the Registry are probably more than sufficient.

Introduction

The LETSystem is designed to be easily understood by government agencies and individuals alike. This is underlined in the definition of the LETSystem (Section 1.2). The legal issues discussed here apply to systems with that definition. Other community currency systems may have different legal implications and they will need to be considered separately, according to the way they are set up and run.

When discussing legal issues, it is useful to draw a distinction between two types of trade:

  • commercial exchanges, where you are offering something connected with your normal line of work, and are supplying something regularly which obviously results from a business.
  • social exchanges, where you are doing something unconnected with your normal work. These exchanges can be classed as "doing a favour for a friend".

With the emphasis on community-building and skills share, a lot of trading will fall into the "social favour" category of exchange. The Inland Revenue recognises that these exchanges are outside the tax system. The DSS, on the other hand, seems to make no distinction between social and commercial exchange.

Commercial exchanges play their part in strengthening the system and revitalising all parts of the local economy. The position here is simple: tax may be liable and should be paid according to existing legislation.

Exchanges which are recorded on a LETSystem are not barter. Barter opens up a legislative can of worms. Much effort will be saved by avoiding the legal analysis of barter. It is sufficient to say that:

* Barter means that the requester must pay something back to the offerer. With the LETSystem this is not so. The commitment is to the membership as a whole, not to any one person. Further, you can make a commitment on the LETSystem with no thought of when or where you will balance it. This point should be stressed wherever possible.

* LETSystem trades assign a value to the exchange which is measured in pounds sterling. This is a contract between two parties which is freely entered into. This contract should not be subject to any valuation by outside authorities. If I want to charge you less than the "going rate" and you accept, that's our decision. We should not have to conform to any requirements for notional valuation.

Notional Values

If the monetary value of a transaction is not clear, the authorities can put a sterling value on it according to their idea of "the going rate". This is often called a "notional value". When assessing notional values, they need not pay any attention to the implied value of the transaction.

Within a LETSystem, the monetary values are clear and the problem does not arise. But with other forms of community currency, lack of clarity over valuations may attract investigation. The investigators may ignore guidelines over "local exchange rate" (the number of units to the pound sterling) and fall back on notional values. Thus we lose the opportuniy to value our own work within the community and are forced back into the values of the national economy.

Dealing with Government Agencies

Local officers were not born yesterday. Rather than set up smoke screens, it may be a better policy to communicate with them, clarifying the social aims of LETS and explaining that many trades are not purely commercial.

LETS and the administrators

A few words on legal structure of LETSystems are appropriate here. One legal freedom that we have in this country is freedom of association. To form an association, all we need to do is to get together and get on with it.

If you do nothing about legal structures then you are considered to be an "unincorporated association". All "members" will then be legally responsible for any debts the association runs up, or any legal offence it commits. If registries and systems organise themselves according to the recommendations in Sections 1.2 and 3.1, several key legal points emerge.

* Because of the "cost of service" ethic, no serious debts should be necessary.

* No assets are held by the Registry/LETSystem. Issues of trusteeship do not arise.

* There is no group responsibility (no "corporate identity" and no "officers"). Legal infringements are a matter for the individuals concerned. Anyone in an administration role is fully accountable to the account-holders for the job they are doing (but nothing else). Their role should be made clear in the Account-Holders’ Agreements (Section 1.2)

* There are no "members" in the conventional sense, just "users" who are bound to each other by the contract set out in the Account-Holders’ Agreements.

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Landsman Community Services Ltd Paper No. 4.0 Version No 1.3 17 August 94
Written by Michael Linton of Landsman Community Services Ltd. and Angus Soutar of Robert Soutar Ltd.
Compiled 10-01-95 by Andy Blunt and Adrian Steele of LETSgo Manchester