Tribunal ruling halts charity tax relief abuse

Another attempted abuse of the tax relief available when shares are gifted to charities has been blocked by a tribunal.

HM Revenue and Customs (HMRC) successfully challenged the tax avoidance scheme used by Nicholas Green and designed by Afortis Limited as part of an ongoing crackdown on charitable tax relief abuse. This First-tier Tribunal (FTT) ruling and its impact on similar schemes could make sure over £35 million of tax is paid.

Under the scheme, shares were listed on the Channel Islands Stock Exchange at a value significantly more than their real worth. The shares were then gifted to charity at the inflated value. The scheme was designed to allow Mr Green to claim tax relief on the amount that the shares had been listed for, rather than on the much lower amount that the shares were worth.

The tribunal ruled that the relief claimed should be reduced significantly from that claimed by those using the scheme.

This latest decision follows HMRC’s defeat of another scheme using charitable reliefs, promoted by NT Advisors, at a tax tribunal last week. 

Nicky Morgan, Financial Secretary to the Treasury, said:

“The government wants to encourage more people to give to charity and has provided tax relief to incentivise this, but we will not tolerate abuse of the system. This case is further evidence of HMRC’s tough action to tackle tax avoidance schemes that seek to abuse charitable giving tax reliefs.

“Taxpayers entering into these arrangements are not only damaging their own reputations, they are harming the reputations of charities that may not be aware they are being used to avoid tax. Anyone thinking of getting involved in a tax avoidance scheme does so at their risk and should know that HMRC will pursue them in collecting the tax that is due.”

Notes to editors

1. The First-tier Tribunal ruling in Nicholas Green vs HMRC can be read at http://www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=7731
2. Mr Green appealed HMRC’s decision to reduce the amount of tax relief he had claimed. The FTT allowed him to claim tax relief in excess of the amount allowed by HMRC but the amount decided by the FTT was significantly less than the amount Mr Green had claimed. HMRC had allowed the relief to be claimed on the basis of each share being worth 30p, but the tribunal ruled it was 35p. Taxpayers using the scheme had claimed the “market value” of the share was £1. 
3. More details on HMRC’s victory against NT Advisors’ schemes can be found at https://www.gov.uk/government/news/hmrc-defeats-nt-advisors-again-at-a-tax-tribunal
4. Follow HMRC on Twitter @HMRCgovUK