Charities used for avoidance of tax, and business rates have been in the news recently.

The Cup Trust was opened in the British Virgin Islands in 2009 but closed by a judge after it emerged that it had raised £176 million but only given £55,000 to good causes. HM Revenue and Customs have told the public accounts committee of MPs that it investigates more than 300 such schemes every year, suggesting that the Cup Trust is just one of many using charities to cloak their real purpose.

And avoidance of business rates has sparked an investigation by the Charity Commission into the Public Safety Charitable Trust (PSCT) which lost a High Court case in May against three councils. PSCT are thought to hold more than 2,000 leases on empty properties which they sub-lease out to charities for a nominal (“peppercorn”) sum. This avoids anyone paying the business rates on the empty property – which are at the same rate as on occupied properties – since if the property is used wholly or mostly for charitable purposes the councils give a mandatory 80% discount and usually a substantial discount on the remainder. The three councils disputed that PSCT’s system of simply putting in technology to broadcast public service messages qualified as enough charitable use to attract the discounts and the court ruled in their favour, ordering PSCT to pay £1.8 million in unpaid business rates and costs.

The Charity Commission has said that it is aware that more councils will be bringing actions against PSCT, and that it is examining whether the trustees of the charities properly discharged their duties when agreeing to the leases with PSCT. (Third Sector)