Suspected abuse of charity tax rules sparks HMRC raids

HM Revenue & Customs is considering its options in relation to the plans,
and has raided the offices of some of those involved with the schemes,
Accountancy Age understands.

Tax experts explained that such schemes involve a flotation, or introduction,
to the market, at which point the hugely increased value of shares in the
floated entity would be gifted to a charity.

Such a move would mean that £10,000 invested in a shell could become worth
£100,000 on paper when floated, and the gift of the shares would give rise to a
£40,000 income tax deduction.

Though there is no specific loophole that HMRC could close to shut down such
schemes, tax experts dealing with the fallout from such plans said that HMRC was
questioning that initial uplift in the share price of the cash shell.

The schemes depend upon an introduction to market, which might not involve
the sale of any shares, resulting in a huge increase in the nominal value of the
stocks. HMRC is thought to be questioning whether such values are estimated at
arm’s length, or are fictitiously high.

One expert said: ‘A lot of high profile celebrities and sportsmen and women
have been targeted by companies marketing these schemes.’

For legal reasons, Accountancy Age cannot name any of those who have
been the subject of the probes, though we can reveal that some high-profile
advisers are thought to have been involved.

One said of the moves: ‘We did have a visit from HMRC. They requested
documents. We gave them the documents they requested.’

Senior government officials are thought to have been incensed by schemes that
involve charity reliefs. HMRC declined to comment.

Related reading