Trust gives to charity


I have a RPT and the trust deed has a wide range of beneficiaries and allows the trustees to give to charity. There is a particular charity at the moment that the trustees would be interested in donating to using some of the accumulated capital as it is in connection to the deceased settlor and a donation of an asset they made well before they passed away.

I was thinking about the ten year charge and exits. Charitable payments are usually exempt from IHT so would there be an exit charge and would this be included as part of the next TYC?

The legislation at S76 IHTA1984 states tax shall not be charged if property ceases to be relevant property on becoming “property held for charitable purposes only”.
It has been suggested to me that this “being held” phrase means a donation to charity would trigger an exit charge/be included in the TYC comp but a payment that is ‘earmarked’ for charity and set aside, so becomes “held” for charitable purposes before donation, would not.

I have also seen commentary that states:
Moreover, under [IHTA 1984, s 76], payments or appropriations by discretionary trusts to such charities, or indeed to political parties, national museums etc are not liable to the interim IHT exit charge.

Anyone know if a ‘straight’ donation is indeed exempt and so would be ignored for an exit and in the TYC computation? Or if we have to ‘jump through the hoop’.

I am leaning towards being ‘safe’ and setting aside the amount before donation but to avoid some paperwork, etc interested in views/experience of this.


You will be able to claim the charity exemption on gifts to charities from the trust. The exemption works in the same way as it would when someone makes a gift to charity in their will. You include the value of the gift when declaring the total value of the trust, but then deduct the gift to charity and claim the charity exemption. What you are left with is the chargeable value of the trust being assessed for exit or periodic charges. I hope that makes sense!

Jane Whitfield
Edward Connor Solicitors

1 Like