Unholy row as church leaders run up massive tax debts

A Croydon couple who have been under investigation since 2015 over their management of hundreds of thousands of pounds of funds from an evangelical church are now subject to further enquiries by the Charity Commission, the tax man and the police, after officials appointed by the charity authority reported being subject to “considerable harassment, intimidation and threats”.

For several years, the Phelpses held their church meetings at the Fairfield Halls

South African-born Martin and Sandy Phelps established the Rhema Church in Croydon in 1991. By 2013, Rhema Church London had an annual income of £1million. For several years, their large congregation met each Sunday at the Fairfield Halls, paying hire fees of £1,000 per week.

According to the church’s own website, “The hand of God has been the force behind the success of this church as it grows from strength to strength.”

But members of the congregation were beginning to ask just whose hand was on the church’s credit cards, as questions were raised about payments for cosmetic surgery, vets’ bills and luxury holidays.

Matters around the church’s charity review have escalated in the past six months, with two “major” investigations by Her Majesty’s Revenue and Customs into around £370,000 of unpaid tax bills, and the church’s interim manager reporting that the police had been called in after he and a member of his staff had been subjected to threats and intimidation. In December, it was announced that Martin Phelps had been dismissed for “gross misconduct”.

And now the Charity Commission has confirmed to Inside Croydon that it is looking into further concerns that the Phelpses are holding weekly meetings for another church in a hotel off the Purley Way.

In November 2015, the Charity Commission had stepped in with a statutory inquiry after the church’s auditor qualified the latest set of accounts.

Rhema Church pastors Martin and Sandy Phelps: subject to investigations by HMRC and the Charity Commission

“Qualified accounts” are usually issued when auditors are dissatisfied with the financial records or evidence of how an organisation’s money has been handled.

The auditors had been unable to find records “to quantify how much of the expenditure incurred on the charity’s credit cards of £203,707, and petty cash expenditure of £76,161, was incurred in accordance with the fulfilment of its objects,” a Charity Commission statement said later that year.

“This included £86,055 relating to overseas development workshops. This raises regulatory concerns that charitable funds may have been misapplied.”

The management of the church’s affairs were handed to law firm DWF. The Phelpses, meanwhile, continued to be employed by the church and to live in a church-owned house in West Croydon.

But the interim manager’s patience snapped recently, publicly reporting “a serious lack of cooperation and, indeed, obstruction”. Sandy Phelps resigned her job as pastor in May last year, the church accountant was fired and three trustees were suspended.

In July, Keith Mills, the Charity Commission’s interim manager, issued this warning to members of the Rhema Church: “Sandy Phelps and Martin Phelps have no authority to speak on behalf of the church or hold themselves out as representing the church. Should you be aware of any instances where they are doing so, I would be grateful if you could please let me know.”

In December, Mills issued a lengthy, further update.

Martin Phelps preaching at what is called the Oceans Church London at the Aerodrome Hotel on the Purley Way

In it, the interim manager said, “There had been a serious lack of cooperation and, indeed, obstruction to the interim manager’s appointment and investigations by various individuals including some employees.

“An example of this was the total lack of cooperation in providing copies of credit card statements in respect of which the interim manager was expected to authorise payment from March 2016.

“There had been various investigations put in place including expenditure on the credit cards, overseas travel, overseas gifts and donations. These investigations are, in part, continuing…”.

At a public meeting with members of the Rhema Church, conducted before Mills published his report, it was estimated that in one year alone, of £290,000 spent on the church credit card, only £57,000 was used on church-related activities. Yet it has also been suggested that rather than attend the Charity Commission’s meeting, the Phelpses opted to go to dinner at The Shard.

Mills’ report went on to explain how HMRC’s two investigations revolved around whether expenditure on the church’s credit card “should have been classed as charitable or personal by the pastors”. It ended up that the charity owes £220,000 to the tax man and approximately £150,000 in respect of the national insurance liability.

“The interim manager covered numerous issues arising out of the finances and lack of governance and control by the trustees including a failure to deal properly with pension arrangements for staff, PAYE registration and payment, issues of mobile phones and various other matters, for instance, the use of cleaners and gardeners at Rose Lawn (the residence of Mr and Mrs Phelps).”

Sandy Phelps: it is alleged that she had a gardener and cleaner at her home paid for by the church

Mills’ report also outlined problems arising with West Croydon Baptist Church, which Rhema had leased as a venue for its services. “The Pastor of West Croydon Baptist Church had been in touch with the interim manager and… raised a number of serious concerns. This resulted in action being taken against an individual who had tried to have the lease transferred to a new church.”

Mills’ final paragraphs offered a very troubling picture: “Unfortunately, the interim manager and a member of his staff had received and been subject to considerable harassment (some continuing), intimidation and threats in the form of voicemail messages, emails and texts, etc. Many of these were purported to be anonymous but had been tracked by the interim manager together with help from the police and individuals had been spoken to. It is understood that there may have been at least one arrest. It is all highly unfortunate and unnecessary. Further action will follow by the interim manager in due course against certain individuals…”.

Meetings of the Rhema Church ceased in August last year, because of the on-going difficulties. In January this year, Oceans Church London began conducting services at the Hallmark Aerodrome Hotel on the Purley Way. That church’s website does not name the church leaders, though photographs on the site show a preacher who appears to be Martin Phelps conducting a service.

Members of the Rhema Church congregation who have been in contact with Inside Croydon confirm that Martin and Sandy Phelps are involved in Oceans Church London. That church has not responded to Inside Croydon’s approach for a comment.

Unholy row: Martin Phelps

“It’s important the community is protected from these sort of people who have been dismissed by the Charity Commission for gross misconduct and continue to come back to poor and vulnerable communities,” one church-goer told Inside Croydon.

Members of the Rhema Church have also stated how church elders behaved, encouraging, “cult-like antagonistic behaviour” among the church community.

The Phelpses, and some of their supporters, are accused of “spiritual abuse” by members of their former congregation. “As ex-members, we are extremely concerned that the church is still operating, albeit under a different guise. There are many vulnerable members who remain, in particular young children and teenagers who are being manipulated via their faith,” one said.

And this week, the Charity Commission confirmed that it was also looking into Oceans Church. A spokeswoman said, “We are aware of concerns about Oceans Church London and have engaged with them.” As the Commission’s inquiry into Rhema Church London is ongoing, they were unable to provide an update at this time due to the risk of prejudicing the procedures.

Meanwhile, Keith Mills, the interim manager, continues to try to clear up the mess he had been handed, and is doing so by selling off the various properties which the Rhema Church London, through donations and tithes paid by its congregation, had managed to accrue over 20 years.

One, Nutfield Court “is now on the market, the proceeds of which will be used to substantially discharge the principal liabilities to HMRC,” Mills reported in February.

“Title to the three properties of which the charity has beneficial ownership, namely, Rose Lawn, Spencer Place and Nutfield Court has now been vested in the Official Custodian on behalf of the Charity Commission on trust for the Charity. This will protect the properties and facilitate the legal process when buyers are identified,” Mills added.

This all means that the Phelpses will soon be looking for a new home: “Mr Phelps and his family are entitled to remain in Rose Lawn until 27 May 2018. It is intended that in due course, this property will be put on the market,” Mills noted.


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About insidecroydon

News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email inside.croydon@btinternet.com
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