HMRC have issued guidance relating to an avoidance scheme that aims to generate gift aid relief and income tax relief on the gift of shares.

A donation to a nominated charity is required and in return shares are received from an unnamed non UK “philanthropist”.  The shares are claimed to be worth up to eight times the amount of the cash donation and are in companies listed on a stock exchange not recognised by HMRC.  The scheme anticipates that the shares will then be donated to the nominated charity creating income tax relief for the donor.

HMRC believe there is also strong evidence that these schemes have links to share scams such as “boiler rooms”.  They involve a high level of upfront fee, paid to the scheme promoters, which is concealed within the original cash donation given to the charity.

HMRC say no gift aid relief is due on the cash donation because the donor is receiving a benefit, i.e. the shares that exceed the value of the gift of the cash donation.  Furthermore, no gift of shares relief is then due because the requirement that shares are listed on the stock exchange recognised by HMRC is not met.

If you are approached to take part in such a scheme, please contact AG Tax Consulting.

Posted on 25 Jan 2010