{"id":19103,"date":"2013-02-01T11:46:54","date_gmt":"2013-02-01T11:46:54","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=19103"},"modified":"2013-02-01T11:46:54","modified_gmt":"2013-02-01T11:46:54","slug":"can-charities-be-used-for-tax-avoidance-it-seems-so","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2013\/02\/01\/can-charities-be-used-for-tax-avoidance-it-seems-so\/","title":{"rendered":"Can charities be used for tax avoidance? It seems so"},"content":{"rendered":"

Last year there was much furore over George Osborne's attempt to cap tax\u00a0relief\u00a0on giving to charity. It was claimed that tax\u00a0relief\u00a0on charitable giving could not be abused.<\/p>\n

I took part in that debate and from last summer\u00a0onwards\u00a0have been aware of the case of the Cup Trust<\/a>, which became public in the Times and Mirror yesterday<\/a>\u00a0whilst I was\u00a0distracted\u00a0by events in parliament.<\/p>\n

The Cup Trust is enormous in charity\u00a0terms. It was the 14th largest charity by income in 2011<\/a>, collecting \u00a397 million. And in two years it allocated just \u00a3135,000 of that to good causes whilst seeking to\u00a0reclaim\u00a0\u00a346 million in gift aid for donors. The vast majority - about 99.98% of its income in 2011- was used to pay for fund raising costs, as the accounts show<\/a>:<\/p>\n

\"\"<\/a><\/p>\n

That is an extraordinary set of accounts and certainly unlike any other I have seen.<\/p>\n

So too is the fact that the cost of\u00a0generating\u00a0the income is explained like this in the accounts:<\/p>\n

\"\"<\/a><\/p>\n

Gilts are, of course,\u00a0government\u00a0bonds. Charities may buy them, of course, but you\u00a0would\u00a0expect to see them on the balance sheet if they did, and not as a cost of raising funds. Since gilts don't vary much in value, and certainly don't become worthless, these gilts if they were a fundraising cost must it seems have been given away by the charity as an inducement to raise funding. It's hard to interpret the accounts in any\u00a0other\u00a0way that I can see.<\/p>\n

Maybe that is why\u00a0H M Revenue & Customs has refused \u00a346 million of gift aid\u00a0relief\u00a0on the claim made by the charity.<\/p>\n

And that may also be why the Charity Commission has been investigating it<\/a>, although without being\u00a0able\u00a0to take action, so far.<\/p>\n

What seems certain is that this is a giant tax avoidance scheme, and as the Mirror points out<\/a>:<\/p>\n

It is run by advisers Anthony Mehigan and Matthew Jenner, who were behind a tax avoidance scheme used by comedian Jimmy Carr and other wealthy people.<\/p><\/blockquote>\n

Now that\u00a0doesn't prove wrongdoing or anything like it: and the Charity Commission I stress have not found the charity doing anything illegal. But it has been denied gift aid\u00a0relief\u00a0so far, and until obvious questions about how a charity can spend 99.98% of its income on unusual fund raising methods that seems the right course of action on HMRC's part.<\/p>\n

And what this also proves is that there is,\u00a0unfortunately, a massive\u00a0market\u00a0for what looks like a tax scheme involving a charity here in the UK, which more than\u00a0justified\u00a0yesterday's PAC hearing<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Last year there was much furore over George Osborne’s attempt to cap tax\u00a0relief\u00a0on giving to charity. It was claimed that tax\u00a0relief\u00a0on charitable giving could not
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