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News - 7 June 2013

Charity Commission may not be 'fit for purpose'

MPs have questioned whether the UK's charity regulator is fit for purpose, after it failed to spot a charity apparently set up for tax avoidance.

A report by the Public Accounts Committee (PAC) said the Charity Commission did not carry out sufficient checks on the Cup Trust charity.

The charity took huge donations but made only small charitable payouts.

In a statement, PAC chairwoman Margaret Hodge said the Cup Trust episode had caused "damage to the reputation of the commission and charity sector".
"The Charity Commission's approach to regulation and enforcement lacks rigour," she said.

Peter Ham Auditor and Head of Schools and Charities at ABDS comments:
“The Cup Trust was given charitable status by the commission in 2009; it then received £176m in income, but gave away just £55,000 to charitable causes. In the meantime, The Cup Trust tried to claim gift aid of £46m, money that otherwise should have been paid to the government in tax.”

The trust's sole trustee was a company called Mountstar - based in the British Virgin Islands and whose directors were already known to UK authorities as being involved in tax avoidance.

And although the Charity Commission began to investigate the Trust in March 2010, it has still not published a report.

But the Commission explained that it had been unable to de-register the trust, because it was legally structured as a charity.

PAC chairwoman Margaret Hodge said
"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."

In the last 25 years, the Public Accounts Committee and the National Audit Office have investigated the Charity Commission repeatedly, and found "severe shortcomings", according to the MPs.

The PAC said it will now carry out a new enquiry, to establish whether it is fit for purpose.

If you need any help and advice with Free Schools, Academy Schools or Charities, contact Lavinia Newman or Peter Ham now to discuss how ABDS can help bring their experience to these matters.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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