Legal Issues

    LETSystems conform to all the requirements of legislation in the UK.

Income Tax and VAT

    For tax purposes, the authorities treat local money trading in the same way as Sterling.
    All taxes on revenues are currently payable in Sterling, whether Income Tax or VAT.
    The Inland Revenue draws a distinction between two types of exchanges:

    1. Commercial exchanges, where something is regularly offered and clearly connected business activity.
    2. LETSystems are not tax avoidance systems and such activities by account-holders are strongly discouraged.

    All commercial exchanges are subject to VAT.
    Social exchanges, where something is offered as 'favour' for a friend.
    The Inland Revenue regards social exchanges as outside the tax system.
    Account-holders are responsible for their own tax affairs. System administrators are not required to report to the Tax authorities. However, the authorities may access information on a specified account-holder through due legal process.

LETSystems Administration and Tax

    LETSystem administration operates on a not-for-profit basis and therefore is not usually liable for tax.

Data Protection Act

    Under the provisions of the Data Protection Act 1984, LETSystem developers are recommended to register. However, Exemption 5, applicable to un-incorporated members' clubs', they may be exempt if they do not implement a detailed constitution or adopt other characteristics that give the system a clear legal status.

Unemployment Benefit issues

The main problems for claimants centre around the 'availablility to work' and earned income issues.

In general, the authorities may regard local mioney earnings as income to be declared and will make appropriate reductions to benefits.

Local money earnings may be deducted from benefit if they exceed the allowable disregard.

Income support may be stopped if claimants are working for more than 16 hours a week even if they are paid in local money.

Claimants are therefore advised to check the regulations very carefully and to act accordingly and responsibly.

Disability issues

Any 'activity' by disabled people may be interpreted as being fit for work. This effectively excludes disabled people from the use of standard LETSystems to provide services. This does not exclude them from buying or selling goods or receiving services through the LETSystem.

However, special LETSystems designed specifically for disabled people only, using non-money equivalent measures, such as hours or gifting, may well be possible.

Relationship to Government

Central government

    LETSystems are founded on community self-help and personal empowerment. Problems within the community are best addressed by local people for themselves with support from governments.
    However, since local currencies are likely to dramatically change almost all aspects of government action - revenues, budgets and programs, there is good reason for governments to pay close attention to LETSystems development.
    Our recommendation is that governments do not directly initiate LETSystems but provide encouragement by co-operating, facilitating, communicating, reviewing economic strategies.

Local government

    Local government can actively support LETSystem development through the provision of loan guarantees, underwriting development costs or providing key resources.
    We also recommend that they participate, accepting rates and local taxes in local money, or using local money in their internal structure.

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