VAT Exemption on charitable wills could earn good causes an extra £800m

The government is being urged to exempt charitable wills from VAT, in a move that could generate an extra £800m for good causes.

The recommendation has been put forward by legacy consortium Remember A Charity to encourage more people to think of charities when making a will.

The consortium predicts a VAT exemption on charitable wills would double the number of people leaving a gift to charity, generating a further £800m for the voluntary sector but only costing the government £375,000 to implement.

Rob Cope, Remember A Charity director, said: “While this change would come at a relatively low cost to government, this could make a huge difference to charities, giving solicitors and will-writers cause to highlight the option and benefits of legacy giving with all clients.

“We need to ensure that legacy giving is not just something reserved for the wealthiest in society; that it is something we are all given the opportunity to do.”

Backing Remember A Charity’s recommendation is The Charity Finance Group. Its head of policy and engagement Andrew O’Brien, said: “Legacies are a growing and important way that the public supports good causes. It is critical that we make giving as easy and effective as possible.”

Also supporting the move is the Institute of Fundraising, with its head of public affairs Mike Smith adding: “This small change in the cost of writing a will could make a massive difference in the number of people who decide to leave a gift to charity.”

The call for VAT exemption has been made amid concerns from the consortium that legacy income will fall when the inheritance tax threshold goes up in April, making exemption from this tax relevant to fewer people.

Remember A Charity is also worried that the Ministry of Justice’s decision to raise probate fees will hit legacy income.

This hike comes into force in May and will see a flat rate probate fee of £215 replaced with a sliding scale of fees, rising to £20,000 for estates worth £2m or more.

Charity legacy group Legacy Foresight has predicted the charity sector will lose £15.8m a year through the move, which represents 0.6 per cent of the total legacy income received by UK charities.

This latest estimate has been made days after the Institute of Legacy Management said the probate fee hike could cost charities more than £18m a year.