Two chartered accountants and one accountancy firm have been charged a combined fine of £190,000 over their involvement in a tax avoidance scheme fronted as a charity.
The Financial Reporting Council (FRC) ordered John Anthony Mehigan, Philip Collins and accountancy firm Hillier Hopkins to pay fines of £70,000, £20,000 and £100,000 respectively for their involvement in the Cup Trust scam.
All three parties admitted in the disciplinary cases that their conduct had fallen short of that expected by the Institute of Chartered Accountants for England and Wales.
“The administration of charities, and the operation of tax avoidance schemes, are both matters where professional accountants should be aware of the heightened level of public interest in their work, and consequently the importance of complying scrupulously with ethical and competence standards,” said Gareth Rees QC, executive counsel to the FRC.
Mehigan was the director of Mountstar, the Cup Trust's corporate trustee, while Collins was the Hillier Hopkins partner engaged to carry out the audit each year.
On top of the fine, Mehigan will also receive a ten-year ban from the accountancy profession, reflecting “the seriousness of his failure to exercise independent judgment when making key decisions on behalf of the charity”.
Each of the three disgraced parties will also have to pay part of the executive counsel's costs, with Mehigan obliged to fork out an extra £80,000, Collins £20,000 and Hillier Hopkins £100,000.
The Cup Trust was registered with the Charity Commission in 2009, purportedly to “improve the lives of young children and adults”.
What the trust actually did was a facetious stretch of this at best. It purchased £176m worth of government gilts, sold them to “donors” for just £17,000, and allowed the donors to sell them on.
The donor would then donate proceeds roughly equal to the cost of purchase back to the trust, and could claim tax relief for this sum.
The Cup Trust claimed £46m in Gift Aid from HMRC on these donations while only giving £55,000 to actual charities, according to a report from the Public Accounts select committee – around 3p in every £100 it received.