“When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.”
Were there a Humpty Dumpty award for imaginative use of language the TaxPayers’ Alliance would be my nominee. Because embedded in its funding machinery is a rather nifty tax avoidance wheeze.
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We only offer charitable status to those who deliver (broadly speaking) a “public benefit“. We guard that status zealously and the reason why is because the state, through the tax system, provides what you might best think of as a type of ‘matched-funding’ scheme.
Because of the cost to the rest of us of that ‘matched funding’, the Charity Commission won’t register a charity which exists for a political purpose. This is why the Taxpayers’ Alliance isn’t a charity. In principle, this is bad news for high income UK taxpayer backers. It means that every pound they give to the Taxpayers’ Alliance costs them (after tax) £1.82. Were it a charity, that same pound would cost those same backers £1.
Unless there was a wheeze.
What about if those wealthy backers gave money to a charity which passed that money on to the Taxpayers’ Alliance?
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Here are the accounts for the year ending 31 December 2014 for the Politics and Economics Research Trust (“PERT“), which is registered as a charity. They show that it made 20 grants to the Taxpayers’ Alliance in that year:
Leaving aside £60,000 which was returned to it and £36,752 in Governance Costs this comprised the entirety of its activity for the year.
What about for the year ending 31 December 2013?
And 31 December 2012?
And 31 December 2011 and 2010?
So over those five years PERT made 95 grants (including 18 in 2010) to the Taxpayers’ Alliance out of a total of 119 (80%). By value 79% of its grants were to the Taxpayers’ Alliance. An average grant of £319,000 per annum.
Perhaps this is a surprise. And then again, perhaps not. Companies House reveals PERT originally had a different name:
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We don’t know who funds PERT. Regrettably its accounts are silent – and so is its website – on the subject. So we can’t know for a fact that they’re wealthy UK taxpayers. But the evidence points to that conclusion.
If you give to PERT you know the bulk of that money – after administrative costs – is going to find its way to the Taxpayers’ Alliance. That is, as I’ve shown, what invariably happens. So if you didn’t intend your money to go to the Taxpayers’ Alliance why would you give the money to PERT?
But, if you know the money is going to the Taxpayers’ Alliance, why do you give it to PERT instead of the Taxpayers’ Alliance? You know that giving it to PERT will cause it to accrue a further layer of administrative charges? And we know how much supporters of the Taxpayers’ Alliance hate ‘waste’.
There’s only one sensible answer to that question. You want the tax relief. If you didn’t you’d give it directly to the Taxpayers’ Alliance – its website does solicit donations after all – and save the administrative charges.
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You might reasonably ask whether PERT performs any real function over and above simply channelling money to the Taxpayers’ Alliance. You might ask whether the reality of the situation is that the money is simply going to the Taxpayers’ Alliance and the Council is simply a mechanic to help its UK taxpayer backers avoid tax on the donations.
The Charity Commission looked at these questions over five years ago. You can see its report here. It looked at whether money had been channelled from a particular body – the “Midlands Industrial Council” – to the Taxpayers’ Alliance and concluded:
PERT mentions this on its website. But the website doesn’t mention why. However, the ‘why’ is apparent from paragraphs 19 and 20 of the report.
Paragraph 19 provides:
It was also confirmed to the investigation that the Midlands Industrial Council has not made any donations to the Charity…
And paragraph 20 provides
If the subject of a complaint to the Charity Commission is that donor x has channelled donations through a charity to obtain tax relief; and the facts show that donor x didn’t make donations and, even if it had, it wouldn’t get tax relief it’s not a great surprise if the complaint is dismissed.
Anyway, you’re bright.
Whatever the Charity Commission’s view as to the merits of a specific complaint about an abuse of the law of charities you can see with your own eyes the evidence that the overwhelming majority of the money given ever year to PERT is passed on every year to the Taxpayers’ Alliance .
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Of course, this mechanic benefits the Taxpayers’ Alliance too.
Assume its wealthy backers wanted to spend £175,275 per annum supporting the Taxpayers’ Alliance. If they gave that money directly to the Taxpayers’ Alliance – which does collect donations – the Taxpayers’ Alliance would have £175,275. But if they funnelled it through PERT, the Taxpayers’ Alliance would have £319,000.
£319,000 is the average yearly amount the Taxpayers’ Alliance received from PERT over the last five years. The difference between it and the notional £175,275 – some £143,725 – comes from taxes paid by the rest of us.
On the evidence, it seems the Taxpayers’ Alliance is the beneficiary of an abuse of charitable tax reliefs. A willing beneficiary too – it applies to PERT for funding. You might find it odd – unattractive even – that an organisation apparently devoted to “protecting taxpayers” routinely puts itself in this position.
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Waiting for Godot 
Congratulations on your brilliant piece of sleuthing and for exposing this scandal.
If this Trust were a charitable device for funding a Trade Union venture, it would be all over the papers like a rash, but for this enterprise – silence.
What we can all do, however, as individuals, is to give what ever publicity we can to your posted blog on this – via Twitter or whatever other means we have.
Grateful thanks again for your sleuthing.
It’s so complex to me it’s consumable. Thanks for this matter of fact battering, it’s most welcome.
Maugham of the Yard..a new sleuth. Congratulations.
Fascinating to see, although a few years ago there was similar public exposure that seems to have had no effect :
http://politicalscrapbook.net/2011/11/taxpayers-alliance-charity-donations/
In view of the other recipients of PERT funding, here are 13 companies registered to the same address as Taxpayers Alliance. This includes the New Culture Forum. Worth a little digging by someone?
http://www.endole.co.uk/explorer/company/postcode/sw1p-3ql
That’s a good spot, thank you. It’s a rich seam; there’s lots more to mine.
How does this differ from the relationship between Amnesty International UK and the Amnesty Charitable Trust? So far as I am aware this has been a common structure for uk campaigning organisations since the McGovern case in the early 80s.
I’ve only looked at the facts of the Taxpayers’ Alliance. And it’s a separate point to the question you raise but it, of course, as a tax campaigning body is potentially amenable to a charge of hypocrisy. That wouldn’t be a feature of any arrangements set up by campaigning bodies outside the tax field.
Excellent post, intriguing stuff – totally agree with the comment about double standards from the media on such issues. Someone tried to post a link to this piece on the TPA’s Facebook page, only for it to disappear later on….I wonder why? Keep up the good work!
New Culture Forum was set up by one Peter Whittle and seems to be to left wing social views what the Taxpayers Alliance is to left wing economics (agin it on general principles). Peter Whittle was the UKIP candidate for London mayor – http://www.peterwhittle.london/
Is tax campaigning in the other direction also too political for a charity, though? I went out and did my bit for Christian Aid’s house to house collection recently, and on past form it will raise £11m or so, including gift aid where people got round to completing the declaration. That, coincidentally, is also the amount it spent last year on campaigning, and of course one of their key campaigns for many years has been tax justice. In addition to the criticisms I would have over their continued use of the $160 bn figure long after it had been discredited, there is is the question of whether campaigning at that level should be carried out by a charity claiming gift aid. If you match the government grants they get to the expenditure it presumably funds, I make it that about a third of their free income is spent on campaigning, though I could well have that wrong.
Thanks to Mike for the info on New Culture Forum.
He’s also raised an issue I’ve been thinking about, and one others (including Jolyon) have as well. This is whether in the 21st century we have laws on Charities and their tax treatment that are up to scratch.
The value of tax breaks for charities ranges from £1bn to £3bn, depending on how you measure it (Gift Aid, higher rate relief, etc). Would it not be much simpler to end any special tax position? It would remove the kind of scam that PERT seems to be operating, end any worries over taxpayer subsidy of any “political” activity, and allow charities to act in any way their members wanted, without fear of the Charity Commissioners judging activities as unacceptably political.
In return why not create a new fund with maybe £1-3bn to spend, which charities and other organisations could apply for. That makes the whole process much more open and clear, sets out what is expected, allows the costs to be capped, and removes any incentive for groups like PERT. It will obviously hit the bigger charities but they ought to be best placed to apply for the funds and may even be better off as they are likely to have the best cases.
I suspect donors will not be affected as they probably think in net terns anyway, so will adjust their donations to reflect the loss of any tax relief.
I wonder what others think?
I am minded to agree with Iain
The issue is more acute in Ireland with our seemingly constant referendums and charitable organizations, on both sides, engaging in lobbying. Revenue did a big clean out of the “Catholic” charities in recent years but promotion of religion (even if the only promotion they actually do seems to be resisting laws on social change) is a stated charitable purpose. Those groups now claim, not without basis, that Amnesty and Atlantic Philanthropies who are promoting such change, retain charitable status. I must admit to being deeply uncomfortable with the idea that American christian fundamentalists clearly subsidize “pro-life” groups in Ireland, but no where near as uncomfortable with Chuck Feeney supporting the Irish Council for Civil Liberties (which tells you which side of that particular fence I sit on).
In both countries we also have the seemingly endless stories of very poor governance within charitable organisations, wasting public money while remaining seemingly unaccountable. Pensions provisions in many Irish charities are modeled on public sector final salary, which no private sector employee could get in the current climate. If a for-profit can’t sustain a DB scheme, why on earth are not-for-profits sustaining them at the expense of the taxpayer?
If there are services which the State should be providing, from healthcare, education etc then the State should provide it. If it wishes to outsource (and outsourcing 98% of your primary schools and a number of hospitals to charities controlled by the catholic church is not really an ideal model) that should be transparently funded via grants.
I can’t imagine a charitable organisation which doesn’t need to engage in some lobbying. I don’t see that Greenpeace should be precluded from seeking tighter emissions regulation, or that the RSPCA should be precluded from lobbying for better animal welfare legislation. But I am not clear that an organisation which exists predominantly to lobby should be grant funded by the state. That said, State funding may be preferable to undisclosed funding…
Whether charitable tax relief is defensible is not a peculiarly 21st century question – it’s an argument that has been running since Gladstone had a go at it as chancellor in 1863. The Economist (in 2012) wrote a good piece on the subject, including a nice quote from itself (in 1863) http://www.economist.com/node/21556570
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