Revised Guidance On 'Fit And Proper Persons' Test
The Finance Act 2010 (the "Act") introduced a new definition of 'charity' for tax purposes, which includes a test that the charity's 'managers' must be 'fit and proper persons'. The definition is only in force in respect of Gift Aid at present, but it will be extended to other taxes, reliefs and exemptions in due course.
HM Revenue and Customs (HMRC) issued guidance to indicate how it would be interpreting the legislation and exercising its statutory discretion. We raised various concerns about the stance taken, particularly the lack of guidance on what 'fit and proper' means and the wide application of the term 'manager'. For further information on the Act or the initial guidance read Alana Lowe-Petraske's article here. HMRC has just published revised guidance (7 February 2011) which seeks to clarify the approach it will take towards the 'fit and proper person' test in an attempt to address concerns raised previously about the guidance.
The key points in the Guidance are set out below and the detailed guidance can be accessed here
HMRC assumes that all people appointed by charities are fit and proper persons unless they hold information to show otherwise. Provided charities take appropriate steps on appointing personnel then they may assume that they satisfy the test at all times unless, exceptionally, they are challenged by HMRC. Where HMRC finds a manager of a charity is not a fit and proper person, a charity will not necessarily lose entitlement to the charity tax reliefs. HMRC can exercise its discretion to allow relief even where the fit and proper persons test has been breached, where a charity can show it made a genuine mistake and there has been no misuse of charity tax reliefs. A charity's tax reliefs and exemptions will not be withdrawn during an enquiry into whether it meets the management condition. HMRC may however...
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