IHT—reduced (36%) rate for estates leaving 10% or more to charity
Produced in partnership with Katya Vagner of PwC
IHT—reduced (36%) rate for estates leaving 10% or more to charity

The following Private Client guidance note Produced in partnership with Katya Vagner of PwC provides comprehensive and up to date legal information covering:

  • IHT—reduced (36%) rate for estates leaving 10% or more to charity
  • Qualifying conditions and the three components
  • Donated amount and baseline amount
  • Calculations
  • Election to merge
  • Notification to charity recipient
  • Wider issues

STOP PRESS: This Practice Note is being reviewed in light of the Supreme Court decision in Routier v HMRC, in which it was held that HMRC was not entitled to restrict the application of the charity exemption on a gift to a charitable trust in Jersey, compared to the position for a trust governed by the law of a part of the UK.

On death, a person is treated as having made a transfer of value equal to the value of their estate immediately before death. Exemptions from UK inheritance tax (IHT) fall into three categories:

  1. those that apply during lifetime only

  2. those that may apply either during lifetime or on death, and

  3. those that apply on death only

The majority of the IHT exemptions are available both for lifetime transfers and transfers made at death and one such exemption is gifts to charities.

Generally, transfers to a qualifying charity or registered amateur sports club in the UK, EU and other specified countries (Norway and Iceland) will be exempt from IHT. The charity exemption is very widely used and in practice, the personal representatives (PRs) will simply need to supply the registered charity number or details of the registered club to HMRC when submitting the IHT account. Due to the wide benefit of this exemption, there are provisions to restrict its abuse. As