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MPs want to grill Charity Commission over avoidance scheme

MPs have questions for the Charity Commission, after a registered charity is alleged to have been a front for a tax avoidance scheme

01 Feb 2013 Accountancy Age

By Calum Fuller

Margaret Hodge ourcreativetalent flickr photostream

THE HEAD of the UK's charity regulator is to be summoned to appear before MPs next month to explain how a registered charity could be used as a front for a tax avoidance scheme.

The new head of the Charity Commission, William Shawcross, will be quizzed by the Public Accounts Committee over the Cup Trust, which raised around £176m over two years from 2010 – more than the Royal Society for the Protection of Birds, the British Heart Foundation and the Salvation Army – yet only £55,000 was put towards good causes.

Instead, it carried out transactions generating Gift Aid reliefs for donors, thereby minimising their tax bills. An investor could expect to recoup most of their money and still claim the Gift Aid.

The trust – which has not acted illegally – would purchase huge annual quantities of gilts, or government bonds. Those bonds were then reportedly sold on for a nominal sum through third parties to investors. The investors then sold them on at market value and donated the proceeds to the charity, giving the investor a big charity tax relief reclaim.

Following a two-year investigation, the commission gave the Cup Trust a clean bill of health, despite the fact its accounts showed its trustee was based in the British Virgin Islands and its founder was a firm called NT [No Tax] Advisors, The Times reports.

Committee chair and Labour MP Margaret Hodge (pictured) said Shawcross "had questions to answer about how such flagrant abuse was allowed to occur".

The commission itself said in a statement that it is "not comfortable" with the Cup Trust's set-up and "understands" that the allegations against the charity "has caused serious concern, not just among members of the public who give so generously to charities, but also among the many thousands of charities that demonstrate high standards of probity, ethics and governance and do so much to support vulnerable people in society".

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