Why the charities tax scandal might lead to more transparency

The new legislation just might work.

We have all seen the stories in which celebrities have been named and shamed for participation in tax avoidance schemes. While some individuals have not always been blameless, the press can evoke similar righteous indignation with lurid tales of tax evasion involving innocent charities in the offshore world.

Tax evasion is not strictly the raison d’être of these enterprises, but there is rarely an innocent motive and is often used as a means of concealing identities. The charity is named as the beneficiary of an offshore trust although the charity itself never receives money from the trust and often, does not even know of the trust’s existence. Instead, the trustees exercise their power to add beneficiaries to benefit an individual who is not named in the trust deed although the charity gets nothing.

As the recent tax evasion stories demonstrate, these unregulated pseudo-charitable structures can be hijacked for shady purposes, and the surrounding press coverage saps one’s confidence in genuine charitable trusts. But could the new legal entity created specifically for charities cast a ray of light to dispel the gloom?

The Charitable Incorporated Organisation (CIO) was introduced in the Charities Act 2006 and, after a frustratingly long gestation period, was finally brought into being in the Charities Act 2011. The first CIOs were registered in December 2012 and since then, the Charity Commission has seen a steady rise in applications.  

The CIO is a corporate entity with a separate legal personality which, like its stablemate, the charitable company (usually limited by guarantee rather than shares), can contract and hold property in its own name and is regulated by the Charity Commission.

One advantage of a CIO as compared with the standard charitable companies is that the latter is subject to dual burden of regulation by the Charity Commission and Companies House. A CIO’s charity trustees and members have limited liability, which protects the trustee or members from incurring personal liability for any debts incurred by the charity, whereas charity trustees are lumbered with personal and (subject to the terms of the trust) unlimited liability. 

Although the delay has elicited caution in many charities considering conversion to CIO status and there is a sense that the CIO is, as yet, untested, the negative headlines linking charitable trusts (albeit incorrectly) to tax evasion may well encourage charities to move to a more transparent structure. Could the CIO yet blossom in May?

Emily O'Donnell is at private client law firm Maurice Turnor Gardner LLPRead more: Charitable giving fell by 20% in 2011-12

This story first appeared in Spear's magazine.

Photograph: Getty Images

This is a story from the team at Spears magazine.

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Why it's far too early to declare Ukip dead

The party could yet thrive if Brexit disappoints those who voted Leave.

"Nothing except a battle lost can be half as melancholy as a battle won," wrote the Duke of Wellington after Waterloo. Ukip can testify to this. Since achieving its founding aim - a British vote to leave the EU - the party has descended into a rolling crisis.

Theresa May's vow to pursue Brexit, and to achieve control of immigration, robbed Ukip of its political distinctiveness. But the party's greatest enemy has been itself. Its leader Paul Nuttall did not merely lose the Stoke by-election (despite the city recording the highest Leave vote), he self-destructed in the process. Contrary to his assertions, Nuttall did not achieve a PhD, was never a professional footballer and did not lose "close personal friends" at Hillsborough. Ukip's deputy Peter Whittle pleaded last weekend that voters needed more time to get to know Nuttall. No, the problem was that they got to know him all too well. A mere three months after becoming leader, Nuttall has endured a level of mockery from which far stronger men would struggle to recover (and he may soon be relieved of the task).

Since then, Ukip's millionaire sugar daddy Arron Banks has threatened to leave the party unless he is made chairman and Nigel Farage is awarded a new role (seemingly that of de facto leader). For good measure, Farage (a man who has failed seven times to enter parliament) has demanded that Ukip's only MP Douglas Carswell is expelled for the crime of failing to aid his knighthood bid. Not wanting to be outdone, Banks has vowed to stand against Carswell at the next election if the dissenter is not purged. Any suggestion that the party's bloodlust was sated by the flooring of Steve Woolfe and Diane James's 18-day leadership has been entirely dispelled.

For all this, it is too early to pronounce Ukip's death (as many have). Despite May's ascension and its myriad woes, it has maintained an average poll rating of 12 per cent this year. This is far from its 2014 zenith, when it polled as high as 25 per cent, but also far from irrelevancy. Incapable of winning Labour seats itself, Ukip could yet gift them to the Conservatives by attracting anti-Tory, anti-Corbyn voters (in marginals, the margins matter).

Though Theresa May appears invulnerable, Brexit could provide fertile political territory for Ukip. Those who voted Leave in the hope of a radical reduction in immigration will likely be dismayed if only a moderate fall results. Cabinet ministers who boasted during the referendum of their desire to reduce immigration have already been forced to concede that newcomers will be required to fill vacancies for years to come. Ukip will be the natural vehicle for those aggrieved by Brexit "betrayal". Some Leave voters are already dismayed by the slowness of the process (questioning why withdrawal wasn't triggered immediately) and will revolt at the "transitional period" and budget contributions now regarded as inevitable.

The declarations of Ukip's death by both conservatives and liberals have all the hallmarks of wishful thinking. Even if the party collapses in its present form, something comparable to it would emerge. Indeed, the complacency of its opponents could provide the very conditions it needs to thrive.

George Eaton is political editor of the New Statesman.