The Supreme Court has ruled that a charitable gift left to a Jersey charitable trust was found to be exempt from UK inheritance tax (IHT).
In Routier and Anor v HMRC [2019] UKSC43 the Court found that a legacy bequeathed by a jersey resident to a local charity is exempt from a £600,000 UK IHT charge.
The testator, Beryl Coulter, who died in 2007 left £1.7 million UK estate to a trust which provides housing for the elderly in Jersey where she was a resident.
The Supreme Court found that the gift to the charity trust qualified for IHT exemption even though the trust was not governed by UK law.
Her executors accordingly requested the charitable exemption from IHT but HMRC confirmed that if this were a trust governed by UK law it would be free of IHT, but they alleged that the Jersey trust did not qualify.
Gifts transferring to qualifying charities are not subject to IHT by s23 IHTA 1984. A charity is defined as being subject to the jurisdiction of a UK court. Beryl Coulter’s permanent residence was Jersey and she left her estate, including UK assets, to a Jersey Trust with charitable objectives.
The Court of Appeal decided to kick out the case as it was not subject to the jurisdiction of the courts of the UK or another EU member state as Jersey is not a member of the EU – and so it did not meet the criteria for IHT exemption.
Mrs Coulter’s executors eventually appealed to the Supreme Court who overturned the Court of Appeal’s decision.
This decision will be welcomed by the charity and wills and probate sectors that tax relief should be allowed for charitable gifts to non-UK charities. However, following Brexit it will presumably be a different story as testators leaving legacies to overseas charities may well have to wait for a further decision to be made.
