The Wellcome Trust’s head of tax and chief investment officer wrote a letter in today’s Times calling on the government to commission a comprehensive review of charity tax law to prevent fraud without inadvertently hurting good causes.

John Hemming (pictured), the charity’s head of tax and Danny Truell, its chief investment officer, wrote the letter in response to the Public Accounts Committee’s comments in its recent gift aid report that abuse of charitable tax reliefs is damaging to the charity sector.

They said that “as the UK’s largest charity, spending £750m a year on medical research”, the Wellcome Trust agreed that tax reliefs designed to promote philanthropy must not be exploited for tax avoidance or fraud, and supported “considered measures for ending abuse”.

But they complained that many anti-avoidance measures introduced by the government have not been well focused, and “allow abuse to continue while having damaging consequences for legitimate charities”. 

They cite the example of amendments to legislation covering company loans to participators, which have created tax charges for some charities “when the point of tax law should be that charities do not and should not pay tax”.

Piecemeal reform is not effective

“Piecemeal reform will not tackle abuse while protecting bona fide philanthropy,” they wrote. “The government should commission a comprehensive review of charity tax law and enforcement to design a system that stops fraud without collateral damage to good causes.

“Britain’s charities fund vital work that deserves to benefit from properly framed and policed tax reliefs: the Wellcome Trust’s support, for example, has enabled the sequencing of the human genome and the development of malaria treatments.  They should not be penalised by legislation to prevent tax abuse.”

The Wellcome Trust is the tenth-biggest charity in the UK by income according to the latest Charity 100 Index but boasts the largest endowment at around £15bn.