HMRC has opened a consultation on the proposal to incentivise charitable giving by introducing a lower rate of inheritance tax for those that leave a legacy in their will.

Anyone is welcome to participate in the consultation, A new incentive for charitable legacies but the government is particularly keen to hear from charities and advisers on wills and inheritance tax.

The consultation follows the Chancellor’s announcement in the Budget that estates can reduce their inheritance tax rate by 10 per cent, to 36 per cent, when they leave a charitable legacy of 10 per cent or more of their net estate. The idea is that this will encourage more people to include charitable bequests in their wills.

In his Budget speech in March, the Chancellor said the measure would raise an additional £300m for the sector.

The consultation is about the policy detail and how best to implement the policy, which is expected to apply to deaths on or after 6 April 2012.  It closes on 31 August.

Richard Fairbairn, head of the tax & trust team at Lester Aldridge LLP, has pointed out that the lower tax rate will mean that in some cases non-charitable beneficiaries will be left worse off, and warned charities to be mindful of this when contacting their prospective donors.