Avoidance using Gift Aid (Spotlight 7)
Published 5 August 2010
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HM Revenue and Customs (HMRC) are aware of schemes that seek to generate Gift Aid and Gift of Shares tax relief claims.
This happens when a cash donation to a nominated charity is paid and in return shares are received from an unnamed non UK ‘philanthropist’. These shares are claimed to be worth up to 8 times the amount of the cash donation and are in companies listed on a stock exchange that is not recognised by HMRC.
For example, The Open Market of The Frankfurt Stock Exchange. This scheme anticipates that the shares will be donated to the nominated charity.
There is also strong evidence that these schemes have links to share scams such as ‘boiler rooms’. They usually involve a high level of upfront ‘fee’, paid to the scheme promoters. That payment is concealed within the original cash ‘donation’ given to the charity.
HMRC believe that no Gift Aid is due on the cash donation because the donor receives a benefit (the shares) that is in excess of the donation.
HMRC also consider that no Gift of Shares relief is due because the requirement that the shares are listed on a stock exchange recognised by HMRC is not met.