The Charity Commission chair has admitted that the regulator could have been bolder and more public in its actions regarding the controversial Cup Trust, used as a tax avoidance scheme by its funders.
The Charity Commission and its new chair, William Shawcross, have come under fire from MPs and charity sector leaders for its handling of the case.
The Cup Trust attracted national media coverage earlier this year and harsh criticism in Parliament after it was revealed that it had been used by its investors to avoid tax. The Cup Trust was set up in 2009 and raised £176m from donations during its first two years but has distributed just £55,000 to charity.
But while it appeared clear the Trust was being used as a tax-avoidance scheme, the Charity Commission ruled the organisation still fulfilled the legal requirements to be a charity - the tax avoidance issue being one for HMRC to address. Shawcross, however, said that his organisation had been "obviously uncomfortable" with how the charity was being used. The Commission investigated the Cup Trust between 2010 and 2012, but did not go public with its concerns or with general advice about tax-avoiding schemes.
Speaking at a lunch at Farrer & Co London offices yesterday, Shawcross said: "I think we could have been bolder at the time."
"We were too lenient," he said. "We should have been more aggressive, more public in our disquiet.
"We should in future learn from that."
Shawcross said the Commission could have pubilshed a report in early 2012 - after it finished its investigation into the Trust - "to make clear our efforts and to raise public awareness".
But he was adamant that the "light-touch" regulatory approach was the correct way for the Commission to deal with charities.
While reminding the audience that tax avoidance is legal, the Commission chair insisted that it was for HMRC to investigate tax avoidance, and suggested the two organisations might do well to work together better in future.
"Charity law is not the weapon with which to fight tax avoidance," he argued.
"In law, what matters is the charity's purposes, not its motives."
He said that the Commission was not able to act against charities which were behaving within the law, but were unpalatable to some.
"A regulator is not a complaints service," he said. The Commission cannot intervene simply because a charity is not liked.
The Cup Trust scandal prompted claims of reduced confidence in the Commission and in the charity sector as a whole, but Shawcross said that while the Commission only had the capacity to spot-check the accounts of around 3,500 of the 162,000 registered charities on its books, the Commission is confident that such schemes are "pretty rare". But MPs at a Public Accounts Committee hearing earlier this month claimed to know of 50 similar such tax-avoiding charities currently in operation.
The National Audit Office has now opened an inquiry into the efficacy of the Charity Commission as a regulator and will report to MPs who grilled Shawcross at the Public Accounts Committee.
