On 8 March 2017, HMRC published an updated version of its “fit and proper person” model declaration, together with an updated helpsheet. The model declaration is intended to be completed by all “managers” of charities, Community Amateur Sports Clubs (CASCs) and any other organisation entitled to claim UK charity tax reliefs.
Who is a "manager" of a charity?
A “manager” includes any trustees of charities, directors of corporate charities, directors of corporate trustees, and any other persons having general control and management over the running of the charity or the application of its assets. Such other persons could include a member of an executive board of a charity, where the executive is not a trustee but, as a senior employee of the charity, has a significant degree of control over how the charity’s funds are spent.
What does the declaration confirm?
By signing the model declaration, the “manager” in question confirms that she or he is a “fit and proper person” to manage a charity. The test as to whether a manager is a “fit and proper person” is a statutory one, but, broadly speaking, a person is a “fit and proper” person if she or he will ensure (or is likely to ensure) that charity funds and the tax reliefs obtained are only used for the charitable purposes of the charity in question.
The model declaration also requires the signatory to confirm certain information about her or his past which may affect whether she or he should be considered a “fit and proper person”. In the updated model declaration, this includes very specific and technically phrased confirmations that the signatory has not been involved in using, designing or promoting tax avoidance arrangements notified to HMRC under the Disclosure of Tax Avoidance Schemes Rules or such arrangements which have been successfully counteracted under the generalised anti-abuse rules.
Why is it important for a manager of a charity to be a "fit and proper person", and complete the declaration?
In order to qualify for the various charity tax reliefs, it is necessary for all managers of a charity to meet the “fit and proper person” statutory test. The completion of the HMRC model declaration by all managers of a charity is important to demonstrate to HMRC, if necessary, that the charity took reasonable steps to ensure that its managers were all fit and proper persons, even if it should later become apparent that this was not the case. The signed declaration does not need to be sent to HMRC, but should be retained by the charity, in case HMRC should ask to see it.
The danger in the new model declaration is clearly that the signatory may well sign without a proper understanding of the declarations to be made in relation to the use or promotion of tax avoidance arrangements and schemes, or, as a new trustee of a charity, may be put off from becoming a trustee at all by her or his lack of understanding of the declarations. Alternatively, charities may end up incurring the cost of seeking legal advice before the model declaration is signed.