Stealth Death Tax Will Cost Charities £10m Per Year

Whilst many people were left worried and anxious about how their families could fund the ‘stealth death tax’ announced by the government this week, many charities have also considered the meteoric impact it could have on legacy giving.

The Institute of Legacy Management have implored the government to reconsider their stance on probate fees as it is predicted that it would mean charities will lose out by more than £10 million per year.

Matthew Lagden, chief executive officer of ILM, said: “The proposed rise in probate fees would significantly reduce income for charities reliant on legacy gifts.

“The Institute of Legacy Management is deeply concerned by the proposed rise in probate fees from a flat rate of £215 (£155 if the grant is obtained by a solicitor) to a maximum of £6,000.

“The new fees would significantly reduce income for charities reliant on legacy gifts, to the tune of £10m a year, at a time when many charities are struggling to meet increasing demand for their services.

“The government’s own impact assessment acknowledges that the current fees cover the average costs of making a grant of probate, so we are clear that this is a stealth tax, which will be borne in part by charities.

“We are also very concerned that the government’s impact assessment dismisses the costs to the charity sector as ‘not expected to be substantial’, when the £10m lost to this tax would fund vital services across England and Wales.”

Nicola Evans, observer members of CTG and a charities counsel at law firm BDB, said: “The government should be transparent about what it is trying to do here, which is to replace the current fixed fee with a new probate tax designed to subsidise other parts of the courts system. Tinkering with the figures does not change that.

“The structure of the ‘fee’ is the same as it was in 2017, when the Spring Budget papers admitted it would be classified as a tax in the National Accounts and when a Parliamentary Committee raised serious concerns at an attempt to raise taxation without Parliament’s consent.

“If passed, the new tax will side-step the long-established exemptions and reliefs of the inheritance tax regime, including the charity exemption. Astonishingly, the government’s impact assessment does not try to assess the cost to the charity sector, instead brushing it off as ‘not expected to be substantial’.”

Rob Cope, dierctor of Remember a Charity, said: “While government expects to generate £185m from the increased charges by 2022/2023, it is important to remember that charitable bequests are worth almost £3bn a year for good causes. The sector cannot afford to risk losing legacy income and we call on government to consider the potential disproportionate impact of this decision.

“We will be urging government to offer a reduction in probate fees for estates that include a charitable gift, helping to mitigate the impact of the fee increase and taking us a step closer to achieving our shared ambition of making the UK the first country in the world where gifts in wills is a social norm.”

Caron Bradshaw, chief executive of Charity Finance Group, added: “We pressed government to put in place a charitable exemption for probate fees to ensure maximum funds go on the causes those donors intended through their legacies. The principle that money given for charitable purpose should not be taxed should apply equally to probate, and whilst government might have made it clearer and simpler for general administration, they’ve missed an opportunity to support charity.”

What will this mean for legacy giving? Should more be done to protect charitable giving and legacy giving gifts? 

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