Leaving Estate above NRB to Charity and Tax Avoidance


(Brandon Lamam) #1

We have two clients, Mr & Mrs - married, who are looking to draft their wills and they wish to allocate the sum equivalent to their combined NRB on second death to their children, with anything above this to charity. On first death their estate will pass to the surviving spouse.

They have been advised that they cannot make this stipulation within their wills as it is constituted as tax avoidance. Has anyone come across this before that can advise if this is correct?

Brandon Lamam
Quilter Private Client Advisers


(Paul Saunders) #2

Initially there was a concern that such arrangements could be caught by DoTAS, but those concerns were quickly resolved and such will provisions are routinely accepted by HMRC without demure.

Even including an uplift of the children’s entitlement to take account of the combined residence nil rate allowance is acceptable to HMRC.

Whoever the clients have been speaking with is either out of date on the issue, or dangerously over-cautious

Paul Saunders


(Ross Birkbeck) #3

Agreed - the advice is wrong.

RSPCA v Sharp & Merton is an example of this type of will: the Court of Appeal there confirmed that the proper interpretation of the will was that it was designed to reduced any IHT charge to NIL.

See the upcoming 18/19 addition of Kessler’s Taxation of Charities and Nonprofit Organisations for more info.

Ross Birkbeck
Old Square Tax Chambers


(Brandon Lamam) #4

Paul, thanks for the comment.

We believed this was the case - is there anything formalised that we could access which we could use to potentially explain this?

Brandon Lamam
Quilter Private Client Advisers


(Paul Saunders) #5

See example 5 at para 13.4.2 of HMRC’s Guidance: Disclosure of tax avoidance schemes (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/701190/DOTAS-March.pdf).

Paul Saunders