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Double Dip for tax relief

The concept of receiving a double saving on both inheritance tax and income tax has been raised in a recent Lexis Nexis Private Client Tax conference. Nicholas Hughes spoke about gift aid and IHT at the conference referring back to a 1997 case, Saint Dunstans v Major. In this case a beneficiary varied a Will to make a payment of £20,000 to Saint Dunstans Charity. This made an £8000 IHT saving on the estate. He also tried to claim gift aid relief (hoping to receive what was then termed a ‘double dip’) but the relief was disallowed as he had benefited from the payment by virtue of the IHT saving (see Finance Act 1990 s.25(2)(e)) which prevented the gift from being a ‘qualifying payment’. It was then discussed how both an IHT saving and gift aid could be obtained by different beneficiaries. If, for example, a Will Is varied by a beneficiary so that £20,000 left to him is instead paid to charity there will be a resulting IHT saving for the residuary beneficiary. The share aid rules provide that the amount of the gift on which tax relief is claimed is to be reduced by the value of any benefit received by the donor. The residuary beneficiary could vary his entitlement to shares in favour of a charity he can secure a 40% inheritance tax saving on the value of the shares and 40% income tax relief on 60% of that value. This is because income tax relief is available If you give land, property or qualifying shares to a UK charity, or sell them to a charity at less than their market value. More information on what property qualifies for income tax relief is available on HMRC’s website

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