Landfill Tax: improving clarity and certainty for taxpayers - CIOT comments
We welcome the Charity Commission‚ s power, introduced by The Charities (Protection and Social Investment) Act 2016 (CPSIA), to remove trustees or senior managers, together with the Charity Commission‚ s consultation on the use of the power. We also welcome the tone of the Commission‚ s description of its policy which is to set a high standard of objective evidence for using the power.
CPSIA gives the Charity Commission powers to make orders disqualifying individuals from acting as trustees under certain circumstances. Three cumulative tests must be met in order for a disqualifying order to be made:
At least one of six conditions applies; The person is unfit to be a trustee; and The order is desirable in the public interest in order to protect public trust and confidence in charities.
One of the six conditions in test 1 (condition C) is that ‚ that the person has been found by Her Majesty‚ s Revenue and Customs not to be a fit and proper person to be a manager of a body or trust, for the purposes of paragraph 4 of Schedule 6 to the Finance Act 2010 (definition of charity for tax purposes), and the finding has not been overturned.‚ Therefore, the application of this condition lies solely with HMRC.
HMRC published guidance on how it would use its powers to designate someone as not being ‚ fit and proper‚ . The most recent version (dated 20 November 2013) added a new test that an individual may not be a fit and proper person if they ‚ have been involved in designing and / or promoting tax avoidance schemes‚ . We raised concerns with HMRC that, if applied strictly on at least one interpretation, this could prevent large numbers of highly competent and ethical people from serving as trustees or senior managers of a charity if say they happened to have been partners in a large professional firm or directors of a company in a large group which had some formal involvement, at some point in the past, with tax planning that might now with hindsight be thought egregious, and in which the individual had no, and might legitimately have been expected to have had no, involvement.
HMRC recognised this risk and it was not their intention to debar partners in professional firms from serving as trustees of charities as a result of someone in their firm doing something in the past that HMRC disapproved of. HMRC is refining its guidance, and CIOT and ATT are working with HMRC on this. Updated guidance has not yet been published, but may be in the near future. We are not aware of HMRC having used this test as yet, but pressure to do so may increase by virtue of the Charity Commission‚ s new powers.
Finally, we encouraged the Charity Commission to use its power, and are seen to use its power, to protect the public interest; so that those with the most to contribute feel supported and encouraged to spend time volunteering.