HM Revenue & Customs has updated its "fit and proper persons" declaration to require individuals to say they have not been involved in tax-avoidance schemes.
But the new declaration, which must be signed by managers and trustees of any charity wanting to claim tax relief, has been criticised by the Charity Tax Group, which said the test was so vague that many law-abiding individuals would not be able to sign it.
The "fit and proper persons" test was introduced in 2010 to prevent tax fraud. It requires senior staff and trustees to sign a declaration saying they are fit to run a charity and allows HMRC to refuse tax relief if it believes they are not. HMRC has said that it has since been used frequently to prevent fraud.
The new model declaration requires charity trustees to declare that they have never been involved in "designing or promoting tax-avoidance schemes" and have never used "a tax-avoidance scheme featuring charitable reliefs".
John Hemming, chair of the Charity Tax Group, said that many accountants, tax advisers and lawyers would find it difficult to sign such a declaration.
"The problem is that this doesn’t make it clear what avoidance is," he said. "Professional advisers will always help people to minimise tax. Also, there’s no time limit, and it doesn’t make it clear what your involvement has to be."
He said that for partners in large financial firms, who were jointly and severally liable for the actions of their partnerships, it would be impossible to say they had never been involved in tax avoidance.
The use of charities for tax-avoidance purposes was highlighted by the case of the Cup Trust, a charity that received £176m in donations over two years, spent only £55,000 on charitable activities, but claimed it was entitled to £44m in tax relief. Its higher-rate taxpayer donors might also be able to claim another £56m.
The trust had a single corporate trustee, Mountstar PTC, based in the British Virgin Islands, whose directors had been involved in setting up a number of tax-avoidance schemes.
Since the Cup Trust case, a National Audit Office investigation into Gift Aid found widespread "fraud and error" worth £170m.
A spokesman for HMRC said it had made it plain that anybody involved in tax avoidance might not be a fit and proper person.
"Tax avoidance is bending the rules of the tax system to gain a tax advantage that parliament never intended," he said. "It involves artificial transactions that serve little or no purpose other than to produce a tax advantage. It’s about operating within the letter but not the spirit of the law."