The Charity Commission does not have the resources and skills to carry out large-scale investigations into tax-avoidance mechanisms such as the Cup Trust, and should not be asked to do so, according to Bernard Jenkin, chair of the Public Administration Select Committee.
Jenkin, the Conservative MP for Harwich and North Essex, was speaking after the launch of The Role of the Charity Commission and ‘Public Benefit’: Post-legislative Scrutiny of the Charities Act 2006, a PASC report into regulation in the charity sector.
Jenkin told Third Sector that the commission could have acted more effectively in the case of the trust, which raised £176m in funds and claimed £46m in tax relief, but spent just £55,000 on charitable activities. But he said that the government needed to be realistic about what the commission could achieve.
"There are some legitimate criticisms of how the commission acted," he said. "The commission could have been much bolder earlier, and if it had been it would have avoided much of the criticism. But the commission doesn’t have the funds, the manpower and the skills to carry out an investigation into something like this.
"Maybe it should be more proactive and carry out more investigations, but if that’s what you want it to do, then you have to give it the funding to do it. If you want more bang, you have to give it more bucks."
The report says that the commission should recommend changes to ensure that another charity similar to the Cup Trust cannot be registered.
"The exposé of the scandal of the Cup Trust demonstrates that there are shortcomings in the regime for regulating tax evasion involving charities," the report says. "We welcome the Charity Commission’s statutory investigation into the Cup Trust. We recommend that the commission follows this inquiry with a review of lessons learnt from this scandal.
"Having reviewed this case, if the commission still feels that it was restricted in its legal abilities to prevent such organisations from obtaining charitable status, we would welcome its proposals for a change in the law on the criteria for registering as a charity."
In a statement, William Shawcross, chair of the Charity Commission, said: "We note that the committee is clear that it is the role of HM Revenue & Customs and not the commission to investigate potential tax fraud."