Sandy Hutchens: whistleblower alerts taxman about an avoidance scheme which is cheating charities out of funds.

The informant lifted the lid on the scheme, marketed in advance of formal disclosure to HMRC under the anti-avoidance rules, which could be keeping £200m out of the UK’s coffers.

HMRevenue &Customs said the promoters of the scheme are aiming it at the UK’s highest earners searching for ways to avoid paying tax on income of £150,000 and above.

HMRC could not be more precise as to how much the scheme was worth, since it is unknown at this time how many people are involved.

Estimates of the cost to the Exchequer for a similar scheme in the past, were in the region of £200m.

The scheme operates by attaching an option to an acquisition of listed shares. The option then provides the seller a choice to buy back the shares in return for the buyer paying a reduced amount to purchase the shares.

However, the donor is able to claim relief on the full value when donating these to charity.

The value of relief is far in excess of what was paid for the shares, or their value to the charity,” HMRC warned.

“The Government has today closed down an abusive tax avoidance scheme, which attempted to exploit tax relief’s for charitable giving,” an HMRC spokesman said.

“The written Ministerial statement by the Financial Secretary to the Treasury, made it clear that HMRC is determined to ensure that tax reliefs for charitable giving are not abused by the tax avoidance industry.

“These tax reliefs provide valuable incentives to encourage people to give and provide support to the charity sector.

“This targets those who use avoidance schemes and will not impact on genuine charities or donors. HMRC will be consulting with charities on the draft legislation which will be included in Finance Bill 2010.”

Another Charity Fraud