HMRC will assume charity employees are 'fit and proper persons'

New guidance says charities 'may assume that they meet the management condition' unless they are informed otherwise

HM Revenue & Customs will assume that all employees and trustees of charities are 'fit and proper persons' unless it is shown otherwise, according to new guidance.

The fit and proper persons test was introduced by the Finance Act in April, and allows HMRC to deny tax relief to a charity if it feels that a senior employee or trustee is a fraud risk.

The test governs whether charities are entitled to tax relief and is intended to reduce the risk of fraud after the extension of UK tax reliefs to donation to charities in all EU countries.

The test has been heavily criticised by charity umbrella groups and lawyers because it adds more administration for charities and because there is no right of appeal against it.

"Provided charities take appropriate steps on appointing personnel, they may assume that they meet the management condition at all times unless, exceptionally, they are challenged by HMRC," the new guidance says.

It says that the legislation is necessary because Gift Aid is paid up front, rather than in arrears, making it difficult for money paid out on fraudulent claims to be recovered.

It also says the only people who will be disqualified are those with a history of fraud or abuse of the tax system, or who are disqualified by the courts or a regulator from acting as a trustee or company director.

Helen Donoghue, director of the Charity Tax Group, an umbrella body that campaigns for a better deal for charities on tax, said she felt that the new guidance eased the extra administrative burden on charities.

She said the guidance could be amended again once HMRC had had more time to consider its stance. However, she said she was still concerned about the impact on individuals identified as not being 'fit and proper' because the guidance did not fully address this. 

"It will be difficult for an individual in that situation to defend themselves, and it would also be difficult for the charity to justifying spending money on their defence," she said. "It will also be difficult for a charity to move an individual or dismiss them, based only on a recommendation from HMRC."

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