Graham Brady, MP for Altrincham and Sale West, has written to the Treasury about the scheme, which would involve donors making regular contributions to a life assurance policy that is paid to a charity after their death.
Brady has suggested that if the donor pays a monthly premium to the charity and the charity in turn forwards it to an insurance company, the payment should be eligible for Gift Aid.
"This is a way to generate significant payments to charitable causes," said Brady. "I couldn't see any reason why we shouldn't be allowed to do it."
The idea was suggested by Jim Lawson, proprietor of Charities Assurance Brokerage. He said the advantage of this system over traditional legacy giving would be that donors would set aside regular payments for their charities before they died, so the final payments would not affect the value of their estates.
So far, the Treasury has resisted the idea that the payment of an assurance premium by a charity is part of its charitable expenditure and has therefore refused to allow Gift Aid on such transactions.
How it would work
- The donor takes out a life assurance policy that is written in trust to a charity
- The charity takes receipt of the policy and the trust deed
- The donor makes regular payments to the charity, which forwards them to the life assurance firm
- The charity claims Gift Aid
- When the donor dies, the charity receives a lump sum.