Cup Trust raised £176.5m in two years but gave only £55,000 to its causes

Charity Commission says it was "not able to intervene as we could not conclude that the trustees have not complied with their duties"

Charity Commission
Charity Commission

The Charity Commission decided it could not intervene in the case of a charity that raised £176.5m in private donations over two years but spent just £55,000 on good causes.

The Cup Trust, which makes grants to smaller charities that help children and young adults, received £97.58m in 2009/10 and £78.93m in 2010/11, all in private donations, making it the sector’s 77th richest charity by income.

Yet it declared no money spent on charitable causes in 2009/10, and only £55,000 the year after.

Accounts show that over the two years it spent £176.37m on buying government bonds – more than 99 per cent of its total income – but later sold most or all of these bonds for just £17,000. Accounts for the year ending March 2011 show that the total funds remaining on the balance sheet were £107,000.

The same accounts also reveal it had outstanding Gift Aid claims worth more than £46m. In the charity’s latest accounts, for the period 2010/11, it says that "having considered legal advice from counsel, the trustee is of the opinion these claims are more than likely to succeed".

The charity has a single corporate trustee: Mountstar (PTC), a private company based in the Virgin Islands.

In addition to the charity’s Gift Aid claims, donors paying the highest rate of tax might also have been able to claim back 37.5 per cent of the value of their own donations in Gift Aid – potentially another £66m.

The Charity Commission said in a statement that it had looked into concerns about the Cup Trust, but decided against any further intervention.

"We have established that it is a charity, which we are required by law to register," the statement said. "We have looked at its system of fundraising, which serves to obtain the benefit of Gift Aid both for the charity and to others who are involved in the arrangements. We have not been able to intervene as after our careful considerations we could not conclude that the trustees have not complied with their duties under charity law."

Sir Stephen Bubb, head of the chief executives body Acevo, called on William Shawcross, chair of the Charity Commission, to conduct an inquiry into why stronger action was not taken.

"The Charity Commission has a lot of questions to answer because it investigated the Cup Trust and failed to close it down," said Bubb. 

Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, said the case "raises important questions about the regulation of the charity involved". 

"The vast majority of Gift Aid is used to support genuine charitable causes," he said. "It is important that these issues are resolved quickly and proportionately and in a way that doesn't damage the tens of thousands of charities that use donations as they are intended."

A spokesman for HM Revenue & Customs declined to comment on the case, which was highlighted in The Times newspaper, for legal reasons, but said that the government had made nearly £1bn available for policing the tax rules. "Where we find tax avoidance, we challenge it and stop it, as shown by a string of high-profile successes in the tax courts."

Third Sector was unable to contact anybody at the Cup Trust for comment.

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