The Charity Commission has shut down a Norfolk-based arts and crafts charity suspected of being a tool for business rates avoidance.
In November 2013, North Norfolk District Council contacted the commission "to outline its concerns that the Melton Arts and Crafts Trust was being used as a tool to avoid paying national non-domestic rates at a number of industrial units", according to an operational compliance report published by the commission yesterday.
The charity registered with the commission in 1990, but events in the hall ceased in the late 1990s as the building underwent restoration, according to the report.
The commission was told by the charity's trustees that it was storing a number of donated goods, including furniture and machinery, at nearby Tattersett Business Park and paying nominal rents to the company that owned the industrial units. The charity planned to sell these goods at auction to raise funds, the report says.
But the regulator discovered that the sole owner of the company that owned the premises where items were being stored was also the charity's founding trustee.
Business rates have been a hot topic for the commission in recent months: five statutory inquiries into charities involving the issue have been opened since the start of 2013.
Charities pay no more than 20 per cent of regular business rates on buildings they occupy.
The report says the commission found no evidence that the charity's trustees had taken professional advice or were doing any charitable activity.
"There are questions about whether the leases are valid and whether the transfer of property was accepted in a conflict of interests," the report says. "However, even if the trust does have title to the goods and has title to the leases, the trust does not operate as a charity."
The charity was removed from the register of charities on 24 June on the grounds that it did not operate. It has 42 days from that date to appeal this decision at the charity tribunal.
The report says this case reminds trustees "to act only in the best interests of their charity". Before entering into a tenancy agreement for empty properties, it says, trustees should "be assured that the tenancy agreement is for the exclusive benefit of the charity, will further the charity’s purposes and is in its best interests", and they should ensure the charity is not being abused for commercial gain.