Like all charities, the 2807FLA has to abide by charity law. Charities cannot just give their money away as they please, there are strict rules governed by the Charities Commission.
The 2807FLA raises money and, as a charity, can benefit from the Gift Aid system. Cotswold Steam Preservation Ltd. can apply to the trustees of the 2807FLA for financial help for specific purposes relating to the restoration or running of the locomotive. If the trustees approve the application then funds are made available to Cotswold Steam Preservation Ltd.
This is complicated by the fact that the steam locomotive No. 2807 is owned by a limited company. This means that it could be possible for shareholders of that company to benefit from funds transferred from the charity to the limited company. This would not be a charitable activity.
To make sure that the limited company's shareholders cannot benefit from the charity's funds, the charity (2807FLA) does not give grants to the company (Cotswold Steam Preservation Ltd.). Instead the charity makes loans to the company. These loans have strict terms which, if broken, lead to repayment of the loan to the charity. But if the terms are not broken, then at the end of the loan term, the loan does not have to be repaid.
Cotswold Steam Preservation Ltd. is a 'not for profit' company. This means that the shareholders are not able to benefit financially from the company. One of the conditions of loans from the 2807FLA is that the company must remain a 'not for profit' company during the period of the loan, otherwise the loan has to be repaid.
The procedure has been approved by the Charities Commission, and the 2807FLA is a registered charity, number 1124785.
Any funds raised by the 2807FLA are therefore guaranteed to be used for charitable purposes, for the restoration and maintenance of Great Western Railway steam locomotive No. 2807.