Charity trustees and managers should be alive to the updated HMRC provisions and guard against any challenge to the charity's entitlement to valuable charity tax reliefs.

In 2010, HM Revenue & Customs introduced the"fit and proper persons" test as a measure to prevent tax avoidance. The test initially suggested that"managers" of a charity, community amateur sports club (CASC) or other organisation entitled to UK charity tax reliefs should declare that they had not been involved in tax avoidance schemes. The term"managers" applies to the trustees of charities, directors of corporate charities, directors of corporate trustees, CASC officials and any other persons having general control and management over the running of the charity or the application of its assets. In large charities, members of the senior management team would also be included in the definition.

HMRC produced guidance and a model declaration. These have now been updated with the declaration requiring individuals to declare inter alia that they:-

". . . have not been involved in tax fraud or other fraudulent behaviour including misrepresentation and/or identity theft

. . . have not used a tax avoidance scheme featuring charitable reliefs or using a charity to facilitate the avoidance

. . . have not been involved in designing and/or promoting tax avoidance schemes".

The challenge with the declaration and HMRC guidance is that there is no definition of what"avoidance" is. In addition, there is no time limit, nor is there any clarity on what an individual's involvement has to be. It has been suggested that many accountants, tax advisers and lawyers may find it difficult to sign the amended declaration.

HMRC's guidance states, however, that when considering the application of the fit and proper persons test to"managers", HMRC will take account of the likely impact on the charity's tax position and that, if an individual has no dealings with HMRC and no control over spending charity funds, even if the person is not a fit and proper person, it is unlikely to affect the charity's eligibility to tax relief.

Charity trustees and managers should be alive to the updated HMRC provisions and guard against any challenge to the charity's entitlement to valuable charity tax reliefs.