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  1. Wealth
June 5, 2013

Public outrage at the Cup Trust charity scandal doesn't mean there's been a crime

By Spear's

Here are the perfect conditions for a storm of outrage ’ international finance, eye-watering sums of money, insincere stated objectives, and a supposedly inept public body thrown in for good measure

The ongoing Cup Trust enquiries are a classic case of over-complex UK tax and regulatory laws falling short of their public policy objectives (or at least public expectations of them), leading to deeply unpleasant institutional recriminations.

In the blue corner, the Charity Commission cowers, numbed by repeated blows to its record and reputation, earnestly maintaining that it has done nothing wrong and that the Cup Trust cannot be de-registered as it has done nothing wrong. (Nothing technically wrong, that is.)

In the red corner we find the angry, barely restrained weight of the British public, goaded by the press into a righteous indignation at a perceived abuse of their laws and their money.

The facts of the case have lent themselves readily to a great story for the papers; an offshore group of tax advisers have set up a charity (with the emotive stated aim of benefitting children and youth) which they have used as a vehicle for moving funds and UK government bonds around whilst making charitable donations of a paltry 0.03 per cent of income.

Here are the perfect conditions for a storm of outrage – international finance, eye-watering sums of money, insincere stated objectives, and a supposedly inept public body thrown in for good measure.

Cui malo?

But has anything wrong actually happened? The poor Charity Commission protest, under the lowering glare of the Public Accounts Committee, the National Audit Office, the Times, the Daily Mirror and the rest of Fleet Street, that their 2010-12 enquiry into the Cup Trust was unable to take action because no illegality has occurred. This is quite right.

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Thus far, although the circumstantial facts may not be promising of benign motives, no actions have been taken that render the Cup Trust outside the rules laid down by the Commission.

Naturally, the PAC has concluded that if no illegality has occurred, then the law must be changed, to ‘prevent,’ explained its chairman Margaret Hodge MP, ‘similar organisations being granted charitable status’.

This is not a good basis for law making. A law reform aimed at eradicating cosmetic defects in an otherwise sound system will only lead to further complication and yet more outlandish schemes for manipulation. What might Mrs Hodge have in mind? To screen individuals involved in start up charities for past involvement in tax avoidance? To prevent charities saving money, eg in endowments? To introduce a ‘good-intentions’ test?

All this fuss

The truth is that the system works well. No undeserved gift aid has been awarded by HMRC. Ted Powell of Mills & Reeve, writing for charity industry blog ThirdSector, notes that there is no evidence of ‘any tax loss to the Treasury’ and wonders, ‘Is this all a fuss about nothing?’

Moira Protani of Wilsons Law meanwhile turns the fire back on the PAC instead, criticising its ‘failure to identify the correlation between cuts in the CC funding… with the reduction in the formal enquiries [it is able to carry out]’.

In a desperate attempt to be seen to be doing something, the CC has launched another official enquiry into the Cup Trust. It is unclear quite why anyone thinks the outcome could be at all different to the last one. It is a straightforward exercise in public appeasement which achieves nothing in the long run except loss to an already underfunded public body. What a mess.

Edward Keene works at private wealth law firm Maurice Turnor Gardner LLP

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