Charities Regulator examining groups over investment vehicles

The Charities Regulator said it is examining “several” charities with links to the opaque world of special-purpose vehicles that are used by banks, hedge funds and private equity firms to facilitate tax avoidance.

The move comes weeks after The Irish Times reported that a senior Revenue Commissioners official, Áine Hollingsworth, had raised concerns about the use of registered charities to help keep these "tax neutral" vehicles off the balance sheets of companies to which they are linked.

SPVs are typically structured under the ownership of a charitable trust to keep them off the balance sheet of the banks and funds that use them. While this is standard practice within the financial sector and allowed under law, Ms Hollingsworth emailed Ronan Hession, head of business tax at the Department of Finance, in April to question whether the charity regulator should "allow that sort of set-up".

The communications were released to Sinn Féin's finance spokesman Pearse Doherty under the Freedom of Information Act.

“While this matter is one regarding tax and falls primarily under the remit of the Revenue Commissioners, the Charities Regulator is currently forming a view on same and examining several of such entities in the context of the Charities Act 2009,” a spokesman for the regulator said.

Charitable status “As with any registered organisation, should the regulator feel that such entities do not qualify for charitable status under the 2009 Charities Act, we may initiate a process to remove them from the register,” he said.

Dublin has become an international hub for largely unregulated SPVs and similar structures called financial vehicle corporations (FVCs) set up under the 1997 tax laws. The industry is one of the most secretive and least regulated parts of Ireland’s €2.3 trillion shadow banking sector, a term used for banking activities that take place outside banks. It is growing rapidly globally.

Assets in Ireland

SPVs and FVCs hold some €750 billion of assets in Ireland, including distressed debt, greenhouse gas credits and catastrophe bonds.

The Minister for Finance Michael Noonan last week told Stephen Donnelly, TD and joint leader of the Social Democrats, that the Revenue Commissioners was examining the use of SPVs for property investments.

“Should these investigations uncover tax-avoidance schemes or abuse, which erodes the tax base and causes reputational issues for the State, then appropriate action will be taken and any necessary legislative changes that may be required will be put forward for my consideration,” Mr Noonan said.