Tax authorities should avoid introducing widespread measures that could catch innocent charities in order to prevent situations such as the Cup Trust tax-avoidance scheme, the chair of the Charity Tax Group has warned.
Speaking in London yesterday at the CTG annual conference, John Hemming said the tax enforcement regime for charities needed "snipers" rather than broad measures that could cause "collateral damage" to the voluntary sector.
He said that HM Revenue & Customs and the Charity Commission should not go overboard in their reactions to the Cup Trust tax-avoidance scheme, which he said had created "an awful lot of bad publicity".
"I just hope we are not collateral damage in the war against abuse," he said. Hemming said his message to HMRC was: "Do not create collateral damage; we need snipers."
Hemming said that charities broadly should not be blamed where abuse occurs. "Do not remove a charity’s status because someone is using it for the wrong purposes," he said.
Kate Sayer, a partner at the accountancy firm Sayer Vincent, said: "My question for HMRC is: why is it focusing on the charities as a conduit and not on the individuals?"
Throughout the day, several speakers and delegates emphasised that the Cup Trust case involved rogue individuals, rather than any inherent evil within charities.
Nicky Morgan, the Financial Secretary to the Treasury, told delegates at the conference that as far as enforcement goes "I think we’re all on the same side".
Morgan, who took questions from delegates after her keynote speech, said: "The difficulty is how we write legislation that catches the bad guys and lets the good guys carry on."
Neil Cohen, a lawyer at the law firm Trowers and Hamlins, said that HMRC’s drive to stop abuse through charities was indicative of a wider trend. "When they find an issue they will legislate, so we end up with piecemeal legislation," he said.
Earlier this month, the deadline closed for responses to an HMRC discussion paper called Approaches to Preventing Charities Being Set up to Avoid Tax, which included two possible passages of draft legislation.
Cohen said that HMRC was open to hearing from the sector, and told delegates: "Everybody should be shouting and responding to these consultations."Nicola Evans, a senior associate at the law firm Bircham Dyson Bell, said: "I think it is fair to say that the charity sector doesn’t always speak with one voice – but when it does, it is a strong one."