Charity regulator attacked over failure to block tax avoidance

THE CHARITY Commission has today been slammed by MPs after allowing an organisation that appears to exist for the purpose of tax avoidance to retain its official charitable status.

The Cup Trust was set up in 2009 with the stated aim of providing grants to “benefit children and young adults”. But despite registering income of £176m it gave only £55,000 to charitable causes while unsuccessfully attempting to claim Gift Aid rebates worth £46m.

The commission spent two years investigating the organisation before concluding in March 2012 that it could not be de-registered because it was legally structured as a charity, despite not being used for exclusively charitable purposes.

Following an expose by The Times in January the regulator belatedly acted to put it under the control of an interim manager.

“The Trust’s true purpose might have been easily detected by the Charity Commission had they carried out more checks before registration, including with HM Revenue & Customs,” said Margaret Hodge MP, chair of the Public Accounts Select Committee, who published today’s report. “The Trust’s sole trustee was Mountstar, an entity based in the British Virgin Islands whose directors are already well-known to HMRC as being involved in tax avoidance.”

The Charity Commission said it was looking at new ways of sharing information with the taxman but said it is targetting resources on other high risk areas such as fraud, terrorist abuse and risks to vulnerable beneficiaries.