Spring Finance Bill 2023 – Bolt Burdon

July 27, 2023

The Spring Finance Bill 2023 includes a new measure which will restrict charitable relief to UK charities only. 

In this blog, Pamela Jarvis from the Wealth and Estate Planning Team at Bolt Burdon, an ILM corporate partner, provides valuable insight on the new measures.

The Spring Finance Bill 2023 includes a new measure which will restrict charitable relief to UK charities only.  This means that donations made, or legacies left, to charities and Community Amateur Sports Clubs (CASCs) based in the European Union (EU) or European Economic Area (EEA) will no longer qualify for UK tax relief from April 2024 onwards.

Prior to March 2023, donations to charities or CASCs located in the UK, EU or the EAA could qualify for charitable tax reliefs in the UK. Additionally, all charitable legacies left under a Will were exempt from Inheritance Tax (IHT) and, if more than 10% of the net estate was left to charity, the rate of IHT charged on the remainder of the estate was reduced from 40% to 36%.

  • Once the Spring Finance Bill has been enacted, the change will be deemed to have come into effect from 15 March 2023 for EU and EEA charities and CASCs that HMRC had not previously accepted as qualifying for charitable tax reliefs. This will apply UK-wide.
  • Donations and legacies to EU and EEA charities and CASCs that HMRC had previously accepted as qualifying for charitable tax reliefs will have a transitional period until April 2024.
  • From April 2024, no donations or legacies to any non-UK charities and CASCS will be eligible to claim UK charitable tax reliefs.

This potentially affects individuals who expect IHT exemption on lifetime gifts or on legacies left in Wills to charities or CASCs. It also potentially affects individuals who claim Income Tax or Capital Gains Tax relief on donations to non-UK charities.

As well as this, a Will that is drafted to include a specific charitable legacy for a charity or CASC based in the EU or EEA may leave the additional cost of the withdrawn tax relief to be paid by the estate’s residuary beneficiaries, something that may be against the wishes of the testator.

As a result, individuals may need to reassess their current tax planning or revise their Will.

Charities located in the EU and EEA also need to be aware of the impact that it will have on them, as they will no longer benefit from tax relief on donations or legacies received from April 2024. This could result in decrease in the amount they may receive as a result of the tax payable, or potentially even a decline in donations made and legacies left in Wills within the UK.

Pamela Jarvis – Probate, Wealth and Estate Planning at Bolt Burdon

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