The High Court has ruled that the interim managers of the Cup Trust should be able to withdraw the tax-avoidance charity’s £46m Gift Aid claim.
The charity became the subject of a Charity Commission inquiry in 2013 after it emerged that it had raised £176.5m in private donations over two years and attempted to claim £46m in Gift Aid, despite having spent just £55,000 on good causes. Donors might have been entitled to claim another £55m in tax relief.
The commission appointed an interim manager to run the charity to the exclusion of Mountstar PTC, a company based in the British Virgin Islands that is the Cup Trust’s sole trustee.
At a hearing in the High Court in January, the commission asked for a ruling that would direct the Cup Trust to discontinue the Gift Aid claim, which Mountstar has been attempting to push through.
The commission had asked the High Court for a ruling because it felt this would be the best way to receive a definitive verdict and other routes would have been delayed by legal challenges from Mountstar.
The regulator argued at the hearing that the prospects of the claim succeeding were negligible and the interim managers, Jonathan Burchfield and Ann Phillips of the law firm Stone King, did not think it was appropriate for the charity to be engaging in "entirely speculative litigation".
It expressed concern in court that millions of pounds of fees would be payable to advisers if the Gift Aid claim was successful.
It said fees of £3.5m would be payable to the family trust of Matthew Jenner, a former trustee of Mountstar who created the scheme, and a further £6.3m to the independent financial advisers Harry Associates, which introduced the taxpayers to the scheme.
Mountstar argued in court that the payment of the Gift Aid claim would bring substantial charitable benefits and called for the claim to be allowed to continue.
In his judgment, published yesterday, Mr Justice Snowden said the decision of the interim managers to discontinue the Gift Aid claim was "within the range of decisions to which rational charity trustees could properly come".
He said: "I therefore propose to give a direction, as sought by the Charity Commission, that the interim managers should be at liberty to discontinue the Gift Aid claims, and sanctioning their decision to do so."
Chris Willis Pickup, head of litigation at the Charity Commission, said: "Cases like this will strengthen public trust and confidence in charities, because they show the donating public that we will take action to tackle abuse. The vast majority of charities serve their beneficiaries, but action will be taken against the few that abuse the privilege of charitable status."
The commission’s statutory inquiry into the charity continues.