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HMRC warns of Gift Aid scam

Howard Lake | 8 January 2010 | News

Scam alert (white chalk text on blackboard). Photo: Photo by Anna Tarazevich from Pexels
Photo by Anna Tarazevich from Pexels

HMRC is warning charities and donors to avoid falling for certain schemes that seek to generate Gift Aid and Gift of Shares tax relief claims.

The warning is featured in the latest issue of HRMC’s ‘Spotlight’, which features examples of what it is likely to interpret as tax avoidance and which it is likely to challenge.

The scheme involves a cash donation to a charity, in return for which shares are received from an unnamed non-UK ‘philanthropist’. It is claimed that these shares worth up to eight times the amount of the cash donation. They are also in companies listed on a stock exchange that is not recognised by HMRC. For example “The Open Market of The Frankfurt Stock Exchange” is mentioned in one example.

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The perpetrators of the scam suggest that that the shares will be donated to the specified charity.

HMRC point out that there is “strong evidence” that these schemes have links to share scams such as ‘boiler rooms’. They usually involve a substantial upfront ‘fee’ from the individual, paid to the scheme promoters, and this is often concealed within the original cash ‘donation’ given to the charity.

HMRC state 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”.

It adds 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”.

The advice is contained in issue 7 of Spotlight.

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