At Work: Finance and IT - Tax evasion - Let's tackle this fraud thing together

Nick Kavanagh, director of global finance at Save the Children

In recent weeks there has been some publicity about the dangers of charities being unwittingly caught up in tax scams.

It's a potentially serious issue. None of us wants to get caught up in fraud or anything illegal - it's wrong and can be damaging for the reputation of the charity.

There are already a number of risks we have a duty to manage effectively.

Examples are money laundering, the proceeds of crime, links to terrorism and fraudulent charity collections. Now we can add tax scams to the list.

On the issue of tax, there is the complexity of distinguishing between what is legitimate tax planning and what is tax evasion. There is also the question of what to do about the grey bit in the middle.

I'm not convinced another guidance note is going to help, unless it is the result of joined-up thinking and is clear about both the nature of the practices that cause concern and the precautions trustees can take.

None of us want to be the victims of fraud, but I hope we all want charities to maximise the funds to which they are legitimately entitled.

Assuming we want the same thing, I would suggest that the Charity Commission and HM Revenue & Customs sit down with charity practitioners and the appropriate umbrella bodies, and work through this together.

For the exercise to be successful, we need to share a common understanding of the line between legal and illegal. We need to assess the risks to identify what the problem is, how likely it is to occur and how it happens - and then agree solutions.

Working through examples, the required research, the professional advice that might be needed and how charities should weigh up the pros and cons before making decisions would also help.

Any guidance should come from the body established by law as the regulator of charities - the Charity Commission - and be rolled into guidance covering the other areas referred to above.

There will always be grey areas, but in this way we will end up with comprehensive guidance to help charities make the right calls, safeguard trustees and maximise the legitimate funds going to beneficiaries and the causes we are all trying to serve.

KEY POINTS

- HMRC recently produced draft guidelines on the danger of charities getting caught up in tax scams

- The Charity Commission should consult HMRC and charity practitioners

- Any resulting guidance should be issued by the commission.

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