French 'association' & IHT

Trusts Discussion
1

I am trying to establish whether a lifetime gift to a French registered non profit (general/scientific) association, commonly known as a 1901 association, would be exempt from IHT as a charitable gift.

My research suggests not but I wondered whether anyone has dealt with HMRC on this point and has a concrete answer?

Thanks

R Simpson
Thomas Simpson Solicitors

2

CJEU. Case n° 2012/2159. Germany was forced to change its legislation over legacies to foreign charities.

see : [http://europa.eu/rapid/press-release_MEMO-14-589_en.htm]

" Taxation: Commission asks GERMANY to stop discriminatory taxation of legacies to foreign charities

The Commission has requested that Germany amend its discriminatory inheritance tax legislation, with regard to legacies to charities in other Member States or EEA States because it is in breach of EU rules on free movement of capital.

The German legislation treats legacies to charities established in other EU/EEA States less favourably than legacies to certain charities established in Germany. Domestic charities are granted an exemption from inheritance tax. However, similar charities established in other EU/EEA States may only enjoy this tax exemption if their State of residence grants an equivalent or reciprocal exemption to comparable German charities. As a result, legacies to foreign charities are frequently more heavily taxed than legacies to German charities. The Commission considers that this is discriminatory and constitutes an unjustified restriction on the free movement of capital. The request sent to Germany takes the form of a Reasoned Opinion. If Germany does not comply within two months, the Commission may refer it to the Court of Justice of the European Union.

(For more information: E. Traynor - Tel. +32 229 21548 - Mobile +32 498 98 3871)"

Peter Harris
www.overseaschambers.com

3

It may be possible if the non-profit can register as a foreign charity (under the rules introduced to comply with the case mentioned by Peter). Compliance is not easy (HMRC have not registered many) but the details are set out here:

https://www.gov.uk/government/publications/charities-detailed-guidance-notes/chapter-2-applications-for-recognition-as-a-charity-for-tax-purposes

Andrew Goodman
Osborne Clarke LLP