Businessman Derek Tughan 'asked to repay millions'

A County Down businessman, who converted two property companies into charities to avoid paying tax, is being asked to pay back millions of pounds.

Solicitor Derek Tughan has also been removed as a trustee of the two charities which means losing control of a housing empire valued at about £15m.

Mr Tughan, 74, has insisted he does not owe anything.

A charities expert said the two bodies are "absolutely, definitely charities" from which no individual may benefit.

'Property empire'

Mr Tughan told the BBC he was "gutted" at the actions of the charity watchdog, the Charity Commission.

"They have grabbed control of Tughan family property and I regard it as state sponsored theft. I am not a charity," he said.

Businessman Derek Tughan has insisted he does not owe anything and claimed he is the victim of "state sponsored theft"

Mr Tughan's late father, Fred, set up two housing rental companies called Bangor Provident Trust and Victoria Housing Estates in the 1950s.

They grew into a property empire of about 500 private houses and apartments.

In the mid-1980s, Mr Tughan converted the companies into charitable status to avoid paying tax on profits.

"In 1985-1986, we got advice that if we changed our rule books to another standard that we would not have to pay tax and that is what we did. On our taxable revenues we paid no tax, nor did we pay any capital gains tax on any properties that we happened to sell," he said.

Legal battle

Recently, the new Charity Commission began investigating the family's two charities.

Mr Tughan then fought an expensive legal battle to prove the two housing bodies were not in fact charities but he lost that case.

Derek Tughan's family firms grew into a property empire that consisted of about 500 houses and flats

At one hearing, Mr Tughan referred to the assets of Bangor Provident and Victoria Housing as "the family silver".

He has now been removed as a trustee from both and no longer has any control over the £15m worth of houses he once ran as a family business.

The commission is also suing Mr Tughan for the return of any money he allegedly moved out of the charities.

Even though they had charitable status for tax reasons, he insists they remain private family companies.

Mayfair flat

Mr Tughan said: "They have taken control. They have confiscated Tughan family property. One day you are in control, the next day you are on the street.

"But I am afraid I am going to have to fight this because it is wrong. It's just plain wrong. There is an injustice being done here."

The Charity Commission has served him with a writ attempting to recover any money earned by Bangor and Victoria that it said was spent on "non-charitable activity".

It is believed this includes a claim to a flat in the exclusive Mayfair district in London.

"What on earth do they think they are doing? There is not a penny of public money involved in these companies," Mr Tughan said.

"So, why should we be pursued? They want to recover any non-charitable activity.

'Hammering'

"There could be millions involved. Many millions," he said, adding it could be as much as £10m.

Asked if he intends paying it, he said: " I haven't got it and I don't owe it. I am no longer a wealthy man. My other activities have taken a hammering over the past five years."

Derek Tughan (right) spoke to BBC News NI's Kevin Magee about his dispute with the Charity Commission

The Charity Commission has appointed consultants PWC as interim managers.

Charity expert Roger Courtney has been appointed as a voluntary trustee to oversee the running of Victoria Housing.

Mr Courtney said: "These are absolutely definitely charities. We went to the High Court which confirmed they are definitely charities.

"The rules are very clear. One of the definitions of being a charity [is that] the assets are locked. No individual may benefit so people who are directors or trustees may not individually benefit at all.

'Governance concerns'

"The commission has identified assets which were formally in the two charities and these have been transferred out of the charities for private use and therefore the Charity Commission and the charities are in the process of a legal way of seeking the return of the assets."

In a statement the Charity Commission said its inquiry relates to "concerns regarding the governance and financial matters" of Bangor Provident Trust Limited and Victoria Housing Estates Limited.

"The commission's inquiry has been subject to delays as a result of a number of appeals, including to the Charity Tribunal and the High Court, in relation to whether or not both organisations were charities and therefore within the commission's jurisdiction.

"These matters have now been resolved and the commission's inquiry into both charities is continuing.

"The commission has been proactive in its approach to this matter, working to protect the assets and beneficiaries of Bangor Provident Trust Limited and Victoria Housing Estates Limited, and looks forward to closing the inquiry once satisfied the governance and associated issues have been remedied.

"As the inquiry into Bangor Provident Trust Limited and Victoria Housing Estates Limited remains live, and a number of related matters are subject to ongoing litigation, the commission is not currently in a position to go into further detail on this matter."