HMRC drops youth club legal action

Three days before the case was due to go to court, HM Revenue & Customs has dropped its legal action against the trustees of an unincorporated community organisation that failed to pay tax on the salaries of its employees.

The nine trustees of the Vassall Ward Youth and Community Project, which ran a youth centre in the London Borough of Lambeth until it went bankrupt at the end of 2006, were being sued for a total of nearly £130,000 by HMRC.

Most of the trustees were pensioners, and many claimed to have been unaware of the financial mismanagement of the charity.

Andrew Studd, a partner at law firm Russell-Cooke, said the case illustrated why charities should become corporate bodies to limit the personal liability of their trustees for losses.

"All organisations should incorporate when they take on long-term obligations such as employees or buildings," he said.

A spokesman for HMRC said it was unable to comment on individual cases.

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