Goalposts cannot be moved
Peter Simpson, a solicitor and partner in Lovegroves LLP formed a registered recreational charity...
...with fellow former trustees Kevin Stott and Abbas Shams, which entered the Charity Commission's Register on 23 September 2003. Mr Simpson was also Chairman of Windsor & Eton Football Club (which was not a charity).
Mr Simpson and the other trustees had incurred expenditure of £120,000 on behalf of Windsor & Eton Football club, for improvements to its grounds and facilities. The Commissioner accepted that the expenditure incurred by Mr Simpson and the trustees on behalf of the football club constituted a loan by Mr Simpson and the trustees to the club.
Mr Simpson and the trustees called for repayment of their loans to the football club but, rather than the money being paid to them directly, they asked that the loan repayment be made by the club to the charity. The club paid to the charity the sum of £50,000. The charity then paid a grant of £50,000 to the football club. The parties attempted to repeat the process with the remainder of the loan balance (i.e. £70,000), but on this occasion no cash changed hands. Instead, the receipt of the donation of £70,000 by the charity, and the award of a grant of £70,000 to the football club, was dealt with by the charity by means of accounting entries, only.
The charity claimed Gift Aid on the donations of £120,000 that it claimed had been received from Mr Simpson and his fellow trustees. HMRC issued assessments on the charity and the trustees to the effect that the donations received by the sports foundation did not quality as charity donations, and so there was no entitlement to Gift Aid.
The trustees appealed against the assessments, but Howard M Nowlan, the Special Commissioner held that the sports foundation had never been a charity in the first place (it was removed from the Charity Commission Register on 2 April 2007), and he had no choice but to dismiss the appeal. He commented that the case ‘left me agonising over how to arrive at the correct answer, and somewhat mindful that I would have welcomed more guidance in relation to charity law to assist me in arriving at that decision’. He concluded ‘ the Appellants should nevertheless be applauded for their selfless generosity’.
Andrew Robinson of Grant Thornton told Caritas: ‘Ultimately, Mr Simpson's case failed because he and the other trustees formed the charity in order to route cash to a non-charitable entity, Windsor & Eton Football Club, with a view to claiming Gift Aid along the way, which HMRC regarded as unacceptable. This case highlights the care needed when dealing with Gift Aid and other charity reliefs - it shows that HMRC are not prepared to bend the rules. That said, one can't help thinking that Mr Simpson could have achieved the desired effect if he had entered into the arrangements slightly differently, and if they had been planned and implemented with a little more attention to the detail.’
Author: Clarissa Dann
Clarissa Dann was the editor of Caritas as well as an HR and management online service,he People Bulletin until July 2011.
She is now the editor of the specialist trade finance magazine, Trade and Forfaiting Review which can be viewed at www.tfreview.com but does write on charity finance and investment from time to time.
Clarissa has a background in legal and professional publishing, as well as business journalism and holds an MBA from
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