Government must avoid ‘negative’ impact on charities in inheritance tax reform

13 Jun 2018 News

Remember a Charity has warned the government to "avoid any potential negative consequences" of simplifying inheritance tax reform that might damage UK legacy giving. 

In a submission that was developed with support from both the Institute of Fundraising and NCVO, the legacy group called on the government to recognise that legacy income is “the largest single source of voluntary income to the charity sector, generating over £3bn each year”. 

It also urged government to not inadvertently harm legacy giving in the UK while it attempted to simplify the inheritance tax system. 

Currently bequests to charity are exempt from inheritance tax, while donations given as a legacy gift are either taken off the value of an estate before IHT is calculated or paid at reduced tax rate if more than 10 per cent of someone’s estate is left to charity. 

In its submission, Remember a Charity made three recommendations to the OTS. These were:  

  • That any review of IHT and attempts to ‘simplify’ the system should take into account the impact on charitable gifts in wills, and avoid any potential negative consequences;
  • That any possibilities of simplification that could help to achieve the shared civil society and government objective of increasing gifts in wills are sought and taken forward wherever possible (for example by considering introducing a tax incentive for everyone who leaves a charitable gift);
  • That this review around any potential changes to IHT fully take into consideration the future work of the Charity Tax Commission (established by NCVO to undertake a full review of the charity tax system).

Rob Cope, director of Remember a Charity, said: “Tax relief should not be considered purely as a saving for the consumer or a cost to government, but as an opportunity to make a real difference to society for generations to come. 

“The current inheritance tax framework encourages legacy giving and normalises conversation around what can still be seen by some as a taboo topic. While IHT may need review, it is essential that any changes will continue to support and encourage gifts in wills.

"This could be a vital next step towards making the UK the first country in the world where legacy giving is the social norm."

The consultation was announced in January by chancellor of the exchequer Philip Hammond. In a letter to the Office of Tax Simplification dated 19 January 2018, he said that the inheritance tax system was “complex” and in need an overhaul. 

The public consultation on inheritance tax closed on 8 June 2018. 

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