The Treasury has extended its proposal to introduce a lower rate of inheritance tax (IHT) where people leave a charitable legacy of 10% or more on death.
Announced in draft legislation for the Finance Bill today, the government said all assets within an estate will be eligible for the reduced 36% rate if the charitable legacy from that estate, or part of that estate, passes the 10% test.
Previously, the proposals related to the deceased's free estate - assets transferred under a Will or via intestacy - only.
For the purposes of the measure, the estate will be divided into three parts: the free estate; survivorship property (assets which would pass automatically to a surviving joint owner; and settled property (assets in a trust).
The 10% test will be applied to each component separately and the reduced IHT rate applied to those components that pass the test unless an election is made to opt out.
Where a charitable legacy exceeds 10% in one component, the Treasury said it will be possible to aggregate other components to ensure the reduced rate applies across all assets.
At Budget 2011 the Government announced a package of measures to encourage charitable giving and reduce the administrative burden on charities.
The package included the introduction of a lower rate of IHT of 36% where people leave a charitable legacy of 10% or more of their net estate when they die on or after 6 April 2012.
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