25/11/2019

Charities must double-check tax status on legacies | Charity Law

Katherine Ellis

The tax status of legacies for charities can be complex and exemptions cannot be assumed.

Katherine Ellis, a Senior Associate Solicitor at Thursfields, was commenting following the judgement of the Supreme Court in the case of Routier and Anor v HMRC which considered whether a £1.7 million legacy bequeathed by a UK citizen to a trust providing elderly housing in Jersey was exempt from inheritance tax.

Katherine said: “Whilst this particular case concerns whether the inheritance tax exemption could apply to a non-UK based charity trust, it also highlights how very complex this area of law can be more generally.

It is often assumed that all legacies left to charity are exempt from inheritance tax, however it is not always that straightforward. Depending on the wording of the Will, a charity’s share of an estate can be hit for tax, wherever it’s based.

In this particular case, whilst the Court of the Appeal had previously formed the view that the charity trust did not qualify for exemption, on appeal the Supreme Court delivered a contrary judgment resulting in the charity avoiding a massive £600,000 inheritance tax charge.

This shows how important it is that charities seek specialist advice on these issues if they are to maximise those gifts so generously left to them in Wills.”

Katherine, who before joining Thursfields worked in-house on legacy issues for a large national charity, added: “There are so many different Wills with various terms and wordings, and so if charities have any doubts at all it is imperative that they seek independent legal advice.

Thursfields has the experience, knowledge and contacts to help local charities’ deal with these issues.”

Anyone wanting to know more about the legal side of legacies can contact Katherine Ellis on 0121 647 5419, extension 5419, or at kellis@thursfields.co.uk

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