The Taxavoiders’ Alliance

“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:

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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?

Capture.PNGAnd 31 December 2012?

CaptureAnd 31 December 2011 and 2010?

Capture.PNGSo 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:

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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

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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.