The facts behind the anger over Government's charity tax claims

The claim

David Cameron said: “There's no doubt abuse is taking place. We’ve been very clearly informed of that by the Inland Revenue. Some people have been using charities established in other countries to funnel money in, so they're not paying 50p tax or 45p tax but 10p or 20p tax. I think that isn't right.”

His spokesman added: “In certain instances they may be giving to charities and those charities don’t, in all cases, do a great deal of charitable work.”

The evidence

Yesterday the Treasury appeared to be unable to explain exactly how the tax avoidance scheme worked. One example they gave would have been illegal, another would have resulted in the individual losing all the money which they had donated and the third would also have been against charity rules.

In addition in order for a recipient to benefit from avoiding tax they would somehow have to get their money back from the charity they had donated to (without having to pay tax) – or get a benefit in kind. But no-one could explain how this would work.

The Charity Commission also said the Government had raised no concerns with them about charities being used for tax avoidance.

Conclusion

The Government is insistent that such tax avoidance schemes do exist – but so far the evidence is very thin on the ground.