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Cup Trust charity tax avoidance affair showed 'clear misconduct' by trustees

Monday, 21 January, 2019

The Charity Commission for England and Wales has concluded that the corporate trustees of the Cup Trust were guilty of 'clear misconduct and mismanagement', using the charity to operate a tax avoidance scheme designed to create Gift Aid payments on behalf of its donors.

The regulator's five-year investigation of the affair led to three directors of Mountstar being disqualified from charity trusteeship. One of the directors, Matthew Jenner, is said to have received at least GBP2 million in fees from the operation, which he effectively controlled. The other two are Darren Stones and Anthony Mehigan. In 2017, the Institute of Chartered Accountants in England and Wales barred Mehigan from the profession for ten years, and fined him GBP70,000 plus GBP80,000 costs for his part in the scheme.

The charity collected more than GBP176 million in ten rounds of donations from about 360 scheme participants between March 2009 and March 2011. It used the money to buy UK Treasury bonds, which it then sold for less than GBP17,000, generating a large loss. The charity also donated GBP55,000 to good causes.

The Cup Trust also claimed GBP46 million in Gift Aid relief for its donors, who were higher-rate taxpayers. In the event, HMRC disallowed the claims, but the affair was exposed in the press in 2013, leading directly to questions in parliament and to the Charity Commission's investigation.

It was also a major factor in the granting of new powers of scrutiny and disqualification to the regulator in the Charities Act 2016, and to HMRC's attempt to impose new 'fit and proper persons' conditions on trustees, based on their tax history.

The Charity Commission said the case had undermined public trust in charities generally. 'Charities rely on the public's goodwill in supporting tax benefits designed to encourage genuine charitable donations', commented the regulator's Head of Investigations Harvey Grenville. 'It is right that we take robust regulatory action where trustees' actions abuse that goodwill'.

Sources