Proposed inheritance tax changes might not boost bequests, say experts

Some lawyers and financial advisers warn that proposed amendments might be too complex and narrow to make a difference

Simon Weil
Simon Weil

Changes to inheritance tax designed to encourage charitable legacies might be too complex and affect too few people to have a positive effect on charitable giving, lawyers and financial advisers have warned.

A measure to reduce inheritance tax from 40 to 36 per cent for anyone leaving 10 per cent of their taxable estate to charity was announced in the Budget in March and is due to be introduced in April 2012. A consultation closed earlier this week.

Keith Johnston, director of policy and communications at the Society of Estates Practioners, which represents professionals involved in writing and planning wills and responded to the consultation, said his members were split over the usefulness of the change.

"There has been quite a lot of debate among our membership how sensible this proposal is," he said. "We don’t know if it will boost charitable legacies or just add complexity to an already complex process. There’s not enough evidence either way."

Simon Weil, a partner at the law firm Bircham Dyson Bell, which also responded to the consultation, said he was "not very convinced" that the new laws would be a good idea.

He said that it would be complicated to determine that any charitable legacy was worth 10 per cent of an estate, and this meant it was likely to be costly for the government, HM Revenue & Customs and for people writing wills.

He also said the new law had limited scope. "Only 3 per cent of estates pay inheritance tax," he said. "The government estimates this will affect a third of them. We think that’s optimistic, but even if it isn’t, that’s still only 5,000 estates a year."

Rob Cope, director of Remember a Charity, which encourages people to leave legacies, said that the legislation was unlikely to affect most people and the government should introduce other measures to target those who did not pay inheritance tax.

But he said that research by his organisation had found that the number of will writers who expected to mention charitable legacies to their clients had roughly doubled as a result of the new legislation.

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