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Case law: Bequests to foreign charities may be exempt from inheritance tax after all

Will-makers who want to leave property to a foreign charity, but previously decided not to on grounds the usual UK exemption from inheritance tax (IHT) for charitable bequests only applies to UK charities, may now be able to do so, following a recent Supreme Court ruling that bequests to foreign charities are exempt too.

February 2020

This update was published in Legal Alert - February 2020

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

A will-maker who was resident and domiciled in Jersey left substantial UK property to a Jersey charitable trust in her will. The issue arose of whether the gift was exempt from UK inheritance tax (IHT). If it was not, additional IHT of some £600,000 would be payable.

HM Revenue and Customs argued that the exemption for charitable bequests only applied if the charity was a UK charity.

The executors of the deceased’s will lost in both the High Court and the Court of Appeal. However, the Supreme Court has now ruled that such a restriction on tax relief for charitable bequests is unlawful under EU law, because it would prohibit the free movement of capital between member states and between member states and third countries.

Operative date

  • Now

Recommendation

  • Will-makers who wish to leave property to a non-UK charity, but have not previously done so on grounds the usual IHT exemption on charitable bequests only applies to UK charities, should now reconsider – although professional advice is recommended.

Case ref: Routier and Anor v HMRC [2019] UKSC 43

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