HM Revenue and Customs has successfully challenged a tax avoidance scheme that donated shares to the Alzheimer's Society and the National Eczema Society and claimed tax relief on three times their value.
HMRC successfully challenged a scheme used by Nicholas Green and designed by Afortis Limited at the first tier tax tribunal last month.
Under the scheme, Green gave the two charities shares in a company called Chartersea, listed on the Channel Islands Stock Exchange. There is no suggestion the charities were involved in avoidance.
Green claimed the shares were worth £1 each but HMRC claimed they were worth only 30p each. HMRC agreed he was entitled to £71,000 of tax relief, but refused another £166,000.
The tribunal ruled that the shares were actually worth 35p each and that Green was therefore entitled to another £12,000 of tax relief.
HMRC says the ruling and its impact on similar schemes could make sure over £35m of tax is paid.
This latest decision follows HMRC’s defeat at a tax tribunal last week of the Bluebox scheme, a £100m scheme involving charities and government bonds, promoted by NT Advisors, who also promoted the Cup Trust scheme.
Nicky Morgan, Financial Secretary to the Treasury, said:
“The government wants to encourage more people to give to charity and has provided tax relief to incentivise this, but we will not tolerate abuse of the system. This case is further evidence of HMRC’s tough action to tackle tax avoidance schemes that seek to abuse charitable giving tax reliefs.
“Taxpayers entering into these arrangements are not only damaging their own reputations, they are harming the reputations of charities that may not be aware they are being used to avoid tax. Anyone thinking of getting involved in a tax avoidance scheme does so at their risk and should know that HMRC will pursue them in collecting the tax that is due.”
Last year, a professional tax adviser was sentenced to 18 months in prison for a £70m tax fraud that involved valuing shares at many times their true worth, donating them to charity and collecting tax relief on the donations.
David Perrin, 46, of Leagrave, Luton, a senior tax expert at the accountancy firm Vantis, was found guilty at Blackfriars Crown Court of dishonestly submitting, facilitating and inducing others to submit claims for tax relief.
