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HMRC internal manual

Inheritance Tax Manual

Reduced rate for gifts to charity: introduction and conditions: introduction

To encourage people to leave part of their estate to charity, IHTA84/Sch1A provides that where at least 10% of a person’s net estate is left to charity, the rate of tax charged is reduced to 36%. In the legislation the word charity has the normal meaning for Inheritance Tax purposes (IHTM11112) and includes registered community amateur sports clubs and organisations in the European Economic Area that meet the requirements for being a charity. The reduced rate of tax only applies to charges that arise on death.

To qualify for the reduced rate, the charitable giving condition (IHTM45002) must be met.

FB12/Sch33 contains the necessary provisions and consequential amendments. The reduced rate only applies to deaths occurring on or after 6 April 2012, FB12/Sch33/para 10.

A new schedule to form IHT400 - IHT430 - will be designed to help taxpayers gather the correct values to calculate whether the charitable giving condition is met, and to reflect the reduced rate when calculating the tax due on delivery of form IHT400.

An on-line charitable legacy calculator has been developed and is available on the HMRC website. Taxpayers are encouraged to use this calculator, to print out the results sheet and send it to us with form IHT430 when they deliver their account