Thursday, 20 March 2014

We know and they know

HMRC issues discussion paper on reducing risk of charities being used for tax avoidance

By Andy Ricketts, Third Sector Online, 17 March 2014

HM Revenue & Customs

HM Revenue & Customs

The paper says the government's approach to preventing charities being set up for tax avoidance has changed after consultation with the sector

HM Revenue & Customs has published a discussion paper asking for views on two possible approaches to reducing the use of charities as tax-avoidance schemes.

The paper, called Approaches to Preventing Charities Being Set up to Avoid Tax, says that the government’s approach to deterring charities from being set up for tax-avoidance purposes changed after the Autumn Statement last year, after consultation with the sector.

The paper says that HMRC’s approach has moved on from considering whether the main purpose of the organisation is to facilitate tax-avoidance arrangements to one that seeks to establish whether the organisation has been set up with "a motive of securing a tax advantage".

It has published two possible versions of draft legislation for consideration.

Version A is geared towards preventing a charity being recognised by HMRC if "one of the main purposes or results of its establishment is to secure a tax advantage", the paper says.

HMRC says sector representatives had expressed concern that this approach could adversely affect private and corporate charitable foundations, because it would be arguable that one of the main purposes of establishing such foundations would be to obtain a tax advantage.

Version B would narrow this "purpose test" from one of a number of purposes to a single main purpose. 

This would reduce the likelihood that legitimate charities would be affected but could make it easier for determined tax avoiders, the paper says.

Commenting on the consultation, Alana Petraske, special counsel at the law firm Withers, warned that HMRC’s proposals could affect genuine charities.

"The proposals rely on establishing a motive of 'securing a tax advantage', which could, on the face of it, apply to those setting up a bona fide family foundation to structure charitable giving," she said.

"No assurance is made that the promised HMRC guidance will definitively exclude such legitimate structures and, in any event, this guidance will be open to unilateral change by HMRC."

She questioned whether the proposed approach would deter people from abusing charitable tax reliefs.

"Determined avoiders will find their way around this," she said. "For the rest, these proposals are a classic example of using a hammer to crack a nut."

The consultation is open until 11 April.


  1. If Version A of the legislation were adopted, I think most of the trusts of the Hales Brethren would lose their charitable status and be back to square 1. I think Version B could also put them at renewed risk, but in that case what might save them is that “purpose” is almost the same thing as “motive” and it is notoriously difficult to ascertain motive.

    I would be in favour of a criterion based more explicitly on a cost-benefit analysis. It would mean making an assessment of the value of the charitable activities to the public, and comparing that with the cost to the Treasury of the tax concessions. If the cost to the Treasury (and local authorities) is deemed to be the greater sum, then the public would be better off without that charity. This criterion would avoid the almost impossible task of ascertaining motive or purpose.

    I also think achieving charitable status for the sake of reputation could be based on a different criterion from achieving the tax concessions. We could have two classes of charity, one that is certified as worthy to receive public donations and another that is also worthy of help from the taxpayer.

  2. The Lord will protect His people.

    Ima Scribe
    (LJO's senior script writer)

  3. One area where wholesale tax evasion has been going on for as long as I can remember in the EB is the non disclosure of so called gifts received by those who minister. Quite clearly payments received because of their position as ministering brothers are taxable. I am sure the EB realise this but being basically a totally unrighteous bunch they were instructed to vary the amounts so that they would not look like regular payments. Symington of course hid his in containers to keep the money out of sight of the authorities.
    In a real church, those who minister are also paid, but being rather more righteous than the EB they are taxed on these payments which are of course also generated by gifts from their congregations.
    The only two honest ministering brothers I know of are long since dead - A.J.Gardiner disclosed his receipts from the EB and paid tax on them. He was, of course, an Inspector of Taxes by profession! And Percy Lyons gave his to charity!
    Can you see this avaricious lot doing that?!!!
    I am however hopeful that this matter is to be pursued. The Revenue's Investigation Section here in the UK are NOT pleasant individuals and not only is there no limit to the number of years that fraudulently avoided tax can be recovered for, interest and penalties will make the total astronomically higher. Jail can also be a possibility. Tax evasion is, after all, a criminal offence.

    1. AJG and PL were from an earlier generation when honesty and Christian living was important. F.J. Fletcher was another who acknowledged all gifts in writing, and used the funds for bibles and other literature to distribute.

      A bible teacher/preacher I knew always issued a receipt for all gifts, showing he kept proper records of all income..

      Times have changed.

  4. Silly boy Larry! Now you have given the PBCC a whole new chapter for their 'Drinking our Beliefs' document - showing how charitable the whole organisation has always been (based on one particular individual from some 50 years ago).


  5. Causing death by dangerous driving is also a criminal offence for which a current PBCC member languishes in prison.

  6. Here is a riddle - what is the difference between a TV evangelist and Bruce Hales?
    Answer - the TV evangelist asks for your money and Bruce Hales demands it.

    1. I thought you were gonna say that the TV evangelist's son's acquaintance didn't drown in suspicious circumstances.

    2. Having some knowledge of how disgustingly unchristian and crooked beedy is prepared to be when he is whitewashing any of his relatives , even more so his progeny , I'm intrigued. Please explain.

    3. Does the above need explanation??? Doesn't it speak for itself?

    4. Can Anon. 21 March 2014 18:32 please tell us what he is referring to... Beedy is a coverup specialist & needs exposure.

  7. "Can Anon. 21 March 2014 18:32 please tell us what he is referring to ... "

    I am a different Anon. This is a story I have heard from different sources but been unable to find any evidence - been through old local newspapers to no avail, so would also be interested in any additional facts - such as the date (I understand the location to be Tweed Heads on the Qld/NSW border). Gay son (which we all know) out swimming (yes, one rule for them, one for us) with friend, son returns to beach, son's (male) friend tragically disappears.

    Can anyone help? Would like the account verified or quashed.