Protecting the fiscal incentives for legacies and more

With the Labour government having settled into Parliament and with much anticipation around the upcoming Autumn Budget, we look at three policy issues to have on your legacy fundraising radar.

 

The Autumn Statement – Will Labour’s first budget ring the changes for IHT and CGT?

The new Government has announced that its first budget will be on 30 October 2024. Prior to the election, Labour said it had ruled out increasing tax for 'working people', however, Keir Starmer and Rachel Reeves have made extensive reference to the black hole in the nation’s finances and of the need to make some difficult decisions around tax and spending.

Speculation has been rife about where potential changes could be made to draw in more income, with rumours that Capital Gains Tax (CGT) and Inheritance Tax (IHT) could be top targets for reform.

Charitable gifts in Wills are free of IHT and charities are exempt from CGT on the sale of property or assets donated to charity. This means that these reliefs act both to directly boost the income received from gifts in Wills, and to encourage a culture of philanthropic Will making.

While there has been nothing to suggest that charitable exemptions would be removed, any changes to the tax framework could have an influence. So, we’ll be paying close attention to the Budget announcement in October and updating the sector if there is any news that is likely to impact the legacy environment.

Together with ILM, we have written a joint submission to Government ahead of the Budget emphasising the importance of protecting the fiscal incentives for legacy income. We have also made a template MP letter available for members.

This forms part of our ongoing dialogue with government to nurture and enhance the UK legacy environment. 

 

Probate – Is the probate backlog a thing of the past?

Government has a key role to play in ensuring legacy income can keep flowing with a well-resourced probate department at HM Courts & Tribunals Service (HMCTS).

Probate delays have had a severe impact on grieving families and charities alike in recent years. However, the past twelve months has seen a marked turnaround in performance at the Probate Registry with monthly grant output levels continually exceeding applications. Waiting times are down and, in July, the number of grants issued hit a new monthly record at over 32,000.

With probate teams having worked through many of the oldest cases, alongside their incoming workload, HMCTS estimates that the backlog will be over before the end of the year. (Members can view the latest probate forecasts here). 

Having seen how quickly a backlog of cases can build up and recognising the increase in death rates expected in the coming years, it’s all the more important that the Probate Registry has the recognition, resources and capacity needed to keep building on the progress made.  We're continuing to work closely with HMCTS as part of the Probate Service Users Working Group and to articulate the importance of resourcing the probate service in our submissions to government.

 

The new Code – What could this mean for legacies?

The Fundraising Regulator is now consulting on the proposed changes to the Code of Fundraising Practice (Code), including rules and best practice for legacies. This is the final stage in a 3-year review, which aims to ensure the Code is both relevant and responsive to evolving best practice. You can have a look at the proposed changes to the Code and share your comments directly here before the deadline of 1^st November 2024.

Changes to the legacy standards are summarised in this table here. Some key changes to be aware of are:

• The shift to a principles-based approach - One of the biggest changes proposed by the Regulator, is the move to a principles-based approach, removing superfluous details or duplication. So, for example, rather than setting out several specific standards determining how a fundraiser must behave when interacting legacy donors, this has been merged into one rule that focuses on being respectful towards donors, with additional guidance and regulations signposted from the Code. Largely, this simplifies and streamlines regulation, which we see as a welcome shift.
• Removal of legacy standard 15.77 – Section 15 of the new Code removes the requirement for charities to respect the testator’s wishes regarding recognition of a legacy. The Regulator has recognised that there are some circumstances when a charity might not be able to agree to this or that it could be in the organisation’s best interest to decline the gift. Instead, the Code references that a testator may include "conditions" in their legacy which are legally binding restrictions on how a charity can use their gift, emphasising the need to consider whether you can meet the conditions before accepting a legacy. Again, this seems a proportionate approach that aligns the Code with Charity Commission guidance on the same issue.

Any changes to the Code influences how legacy fundraising is regulated and what might constitute best practice. So, we encourage you to feed into the consultation directly, share your thoughts via the CIOF’s survey for fundraisers here, or to get in touch with any comments or concerns at info@rememberacharity.org.uk.