Report recommends VAT exemption for charitable wills

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The Charity Tax Commission has suggested a string of reforms to help third sector fundraising.

17th July 2019 by Gavin Stuart 0 Comments

Charitable wills should be exempt from VAT, according to a new report from the Charity Tax Commission.

The report, published on Wednesday, states that such a move would give greater incentive to solicitors to raise the question of whether someone wants to leave a gift to a charity in their will.

This could generate a further 15,000 charitable legacies a year, the Commission estimates.

Sir Nicholas Montagu, who led the report team, said the move could raise an additional £72m a year for good causes costing the taxpayer less than £1m.

Remember A Charity, the third sector consortium which encourages people to leave money to good causes in their wills, has been campaigning for the move for years.

Director Rob Cope welcomed the report and said: “We know that the current Inheritance Tax breaks are a powerful motivator for professional advisors to raise the option of legacy giving with clients and to encourage people to give, but they are only available to a minority of the public.

“To normalise legacy giving, we need to create a more level playing field and ensure that legacy giving is not something reserved for the wealthiest in society, but something that we are all encouraged to do. 
“Introducing a VAT exemption on charitable wills would benefit every supporter, encourage legacy giving and ensure that charitable bequests are considered every time somebody writes a will.

“The key to growing legacy giving is driving consideration and conversation. Fiscal incentives such as our VAT proposal have huge potential to be a powerful lever for change, helping charities and advisors to become louder about legacies.”

The Commission’s report also sets out a number of other recommendations to reform the ways in which people donate to charity.

These include allowing higher earners to pass their tax relief onto charities more easily; reforming business rates to prevent charities losing out on rate relief when they set up trading subsidiaries; and conducting a major review of VAT post-Brexit to address long-standing problems and increase charitable activity.

Sir Nicholas said: “The question we have been grappling with is this: could the tax system be improved so that good causes get more with minimal cost to the Exchequer?

“It’s 20 years since these issues were looked at properly. In that time the way we live - and the way we give - has changed completely. That’s left us with some rather clunky processes which belong in an analogue age rather than the digital times we are in now.

“We have now published our report and made a series of recommendations – some to enact quite quickly and others that require concerted action in the longer-term.”

Anna Fowlie, chief executive of the Scottish Council for Voluntary Organisations (SCVO), welcomed the report's reccomendations.

She said: “SCVO welcomes the Commission’s attempt to undertake a fundamental review of charity tax – the current system has become increasingly bureaucratic, with far too many recent policy decisions being challenged in law courts.

“We will continue to support the UK Charity Tax Group, and its campaign to improve the tax environment for charities.”