Man Group's chief executive gave nearly £4m to charity yesterday through a share sale, in a move that will wipe out the majority of his income tax bill.
Stanley Fink, who is preparing to step down as the boss of the world's biggest quoted hedge fund manager, sold 2.58 million shares to an unnamed charity at 336p - the price at which he bought them. If the charity sold at yesterday's closing price of 482.25p, down 4.5p, it would have netted a profit of £3.8m.
In addition to incurring no capital-gains tax liability, Mr Fink is able to claim income tax relief of 40 per cent of that, removing £1.5m from his tax bill.
Last year, Mr Fink - one of the best-paid chief executives in the FTSE 100 - was paid a basic salary of £462,000 with a bonus of £5.5m taking the total package to a little less than £6m. As a top rate payer, his tax bill on that would have been £2.4m before relief available on charitable donations.
The relief on transactions like this was brought in by Chancellor Gordon Brown with the aim of encouraging high earners like Mr Fink to donate to charity.
Kevin O'Connor, a tax partner at Baker Tilly, said: "This is perfectly legitimate. It is a nice tax break that was brought in three or four years ago to encourage charity donations."
Mr Fink is a supporter of a number of children's charities and has previously given substantial sums to Absolute Return for Kids, a cause that has become highly popular with London's hedge fund community.
He has also helped fund Burlington Danes, a London City Academy, and the Evelina Children's Hospital Appeal.
However, while Mr Fink's donation was above board, critics have argued that some wealthy individuals have used the tax break for less noble purposes, prompting the Inland Revenue to write to charities warning them to check before accepting money.
The trick involves investing in companies such as AIM-listed cash shells, whose shares then rise as the involvement of high-profile individuals becomes known. The shares are then donated to charity, generating potentially huge tax reliefs, before they then fall back.
Dan Bawtree, the head of Charities at BDO Stoy Hayward, said: "I've never personally come across this, but it has caused concern. The charities would argue that it's not their job to check where money is coming from, and if they get some shares, good luck to them.
"This is a good tax relief and it would be a great shame to lose it because of one or two individuals."Reuse content