On Tuesday 15th December 2009, just as many were preparing to wind-down for the seasonal break: Stephen Timms, Financial Secretary to the UK Treasury blocked a tax scheme designed to secure income tax relief from a gift of shares to a Charity that was being heavily marketed to London Bank Bonus recipients. The use of UK Charities in tax schemes is not new and several previous schemes have been blocked or are the subject of investigations, some criminal.
The scheme was basically a circular one, where say £1m of UK quoted shares were sold from an Offshore Company to a UK Taxpayer for £100k; then gifted to a UK Charity and then given back to the Offshore Company, by the Charity. The key was an option (to buy back the shares for £1!) and in valuing the gift by the Taxpayer it was ignored, as the UK tax legislation does not cover such "contingent liabilities".
Daniel Feingold, Senior Partner of Strategic Tax Planning Partnership comments:
"This scheme is merely the latest in a line of schemes exploiting Charitable relief on share gifts. Two Directors of UK Accounting firm, Vantis Plc are now facing a criminal trial at the Old Bailey Court in January for involvement in a similar scheme. The "purposive approach" to interpreting tax law adopted by the UK House of Lords in the IRC Commissioners –v- Scottish Provident Institution (2004) case, would have rendered this scheme ineffective anyway. The fact that such a scheme was still being marketed, demonstrates that there are still many UK Advisers who do not understand the boundaries of acceptable tax planning. It also shows that legitimate tax planning, NOT artificial schemes, are the best way to plan for the 50% income tax". This is perhaps the best message to take into the New Year, as the April 2010 tax hike approaches!
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