The Charity Commission was right to register the Cup Trust, a charitable tax-avoidance scheme, because it "meets the legal definition of a charity", the regulator said today in its response to a report by the Public Accounts Committee.
The PAC had recommended the commission should urgently review its decision to register the Cup Trust. But in the response, published today as a Treasury minute, the commission said it had "reviewed its conclusion that the Cup Trust meets the legal definition of a charity and reached the same conclusion".
In the document, the regulator said it would publish justification for this decision after the conclusion of its statutory inquiry into the charity, which is the subject of a hearing taking place this week at the charity tribunal.
"The commission had to register the Cup Trust since it was legally established for exclusively charitable purposes for public benefit and fell within the jurisdiction of the High Court, as confirmed by independent legal advice," the commission’s response said. "The public benefit requirement relates to the purposes of an organisation seeking registration, not its subsequent activities."
The PAC report, published in June, said that if the commission continued to conclude that the Cup Trust was legally a charity, "it should identify ways the law should be changed to ensure that organisations like the trust are not granted charitable status".
The commission said it was "reviewing its regulatory remit and powers to act where charities engage in tax schemes, although it is not responsible for administering tax reliefs".
The PAC report also recommended that the commission and HM Revenue & Customs develop a joint registration process.
The commission said the two organisations were developing "a joint portal to apply simultaneously for registration as a charity with the Charity Commission and recognition as a ‘charity for tax purposes’ by HMRC".
The commission said it had put in place "a new risk framework and assessment process" that identifies organisations with complex structures as high-risk.
The PAC also recommended that the National Audit Office examine the commission’s approach to regulation, which the NAO has agreed to do.
Sam Younger, chief executive of the commission, said in a statement accompanying the response that he was confident the regulator had responded effectively to the PAC report.
"Indeed, many of the committee’s recommendations relate to work that is already in train," he said.