- On July 26, 2019
VAT should be removed from the cost of writing a Will that includes a charitable legacy, according to a major new report.
The report, issued by the Charity Tax Commission, states that making charitable Wills tax exempt would give solicitors a greater incentive to raise the questions of whether someone wants to leave a gift to charity.
It’s estimated that if all professional advisers referred to the potential of legacy giving, this could generate a further 15,000 charitable legacies a year potentially worth £72 million.
Sir Nicholas Montagu, Commission chairman, is calling for an “urgent overhaul” of tax reliefs offered to UK charities.
He said: “Every day, millions of people give money to charities of all shapes and sizes.
“This enables them to do so much to strengthen our communities, protect our heritage, look after the environment and provide essential services to our fellow citizens.
Charities Pick Up The Slack
“With the continuing strain on the public finances forcing the retreat of the state from its universal funding role in many areas, charities often pick up the slack.
“This would be impossible without the financial support tax reliefs provide as well as the extraordinary work done by so many dedicated volunteers and professional staff.
“The commission set out to ask whether the tax system could be better employed not just to help protect existing giving but also to encourage a new wave of philanthropy. The answer is a clear ‘yes’.”
The report highlights the fact that for charities, one of the biggest benefits of Inheritance Tax relief is that it provides an opportunity for advisers to talk to clients about charitable giving.
Evidence points to a direct link between a conversation with an adviser during the Will-writing process and the likelihood of an individual leaving a gift in their will.
Some 35% of people in the UK say they would be happy to leave a charitable legacy in their Wills, according to Remember A Charity research, yet only 6% do so.
Inheritance Tax & Charitable Legacies
If you decide to leave money or an asset to a charity in your will then it won’t be counted as part of your estate for Inheritance Tax (IHT) purposes under the ‘charitable legacy’ rules.
Additionally, you can cut your IHT liability on the rest of the taxable part of your estate from 40% to 36% by leaving 10% of the net value to charity.
However, the rules aren’t always as straightforward as this implies therefore it’s important to get professional advice on IHT and Wills, which is where Family Estate Planning Ltd can help.
Sir Nicholas added: “It’s been 20 years since charity tax reliefs were last reviewed, and many of the rules were written for an analogue era.
“With people giving by text message and contactless payment, and with many donors themselves increasingly mobile, we need a system fit for the digital age if we are not to see the UK’s natural generosity held back.
“The Charity Tax Commission’s recommendations could help bring the tax treatment for charitable giving into the 21st Century and result in a huge increase in the amount of money available for good causes.
“Yet none of these proposals should involve significant extra public spending or lost revenue. It’s the right time to get on with this.”
You can read the full Charity Tax Commission report here.
For advice about Wills, together with the rules surrounding charitable giving and Inheritance Tax, please email firstname.lastname@example.org or call Andy on 07984 013533.