Philanthropy and tax
Philanthropy and tax
For many years, the tax system in the UK has been consistent in promoting philanthropy whatever the political persuasions of those in charge at HM Treasury and often despite the state of the national finances. Of the many taxes that individuals are subject to across the board, charitable giving attracts amongst the very best of the reliefs available. And now that the proposed cap on relief available on charitable donations has been dropped, we are safe in the knowledge that this will remain the case (for now).
There is however, a new relief for estates of those who died after 5th April 2012 last year. An inheritance tax which can lower the burden even for those who are not charitable but receive bequests – in addition to the long standing reliefs for capital gains and income tax. At present, the principle is that the more you give, the more tax relief you can obtain (assuming enough tax was paid or payable).
For those looking at their Wills, the new as well as existing inheritance tax reliefs should be bourn in mind when drafting them if charitable bequests are desired.
Even if someone died after last April without considering these points in their will, those inheriting might consider a deed of variation in favour of charity. If done in a valid form within two years of death, this deed can have a retrospective effect for inheritance tax, as if the Will had always contained the variation. Interestingly, as variations are not retrospective for income tax (the fiction stops at inheritance tax), qualifying assets such as quoted shares may not be the deceased's for income tax purposes. This indicates that other tax reliefs may also come into play to make the action yet more tax efficient. Tax rules in this area are fairly complex and commentaries are not always clear as to the extent of the reliefs in specific circumstances, but it does deserve careful consideration.
As ever careful planning and advice should give the best opportunity for good results and avoidance of the many pitfalls that our complex tax legislation can throw up.
Kevin Custis is director of Rathbones Trust Company and can be contacted at email@example.com