Gift Aid Scams: Tax Relief Fraud

Recently, various schemes exploiting Gift Aid and designed for tax relief fraud have been uncovered by HM Revenue & Customs. In 2013, the National Audit Office (NAO) revealed shocking statistics detailing the extent of Gift Aid and tax relief fraud. Worth approximately £1 billion, to legitimate charities, Gift Aid tax relief fraud cost the government around £170 million in lost tax revenue. At the time, the NAO warned that the system was at risk of criminals creating bogus charities to commit tax relief fraud. Since then, despite increased powers granted to the Charity Commission, tax relief fraud schemes remain rife.

The Cup Trust – Gift Aid and Tax Relief Fraud on a Massive Scale

The Cup Trust – In 2009, the Cup Trust was set up as a charity. With a corporate trustee based in the British Virgin Islands, the charity issued grants to small and start-up charities support children and young people. In reality, the Cup Trust was nothing more than an elaborate tax avoidance scheme. The Trust would borrow money, purchase gilts and sell them to an intermediary at a sub-market rate. Then, the intermediary would sell the gilts on to higher-rate UK taxpayers, for a nominal sum. Thereafter, the onward sale of the gilts would provide a sum equal to the market value of the gilt to the charity, plus an added nominal sum. While the higher-rate taxpayers claimed tax relief on their donations, the charity pocketed the Gift Aid repayment from HM Revenue & Customs.

Following numerous enquiries and investigations, The Cup Trust failed to comply with a legal notice issued by HMRC regarding Gift Aid claims. As a result, it was issued with a penalty for non-compliance by HMRC. Also, the tribunal that resulted found that the charity’s operator, Mr Matthew Jenner, “preferred the interests of the donors to those of the charity.” Ultimately, HMRC demonstrated that the Cup Trust was no more than an elaborate tax avoidance scheme based on dubious Gift Aid repayment requests and tax relief fraud.

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