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Where Taxpayers and Advisers Meet

Can CGT paid during estate administration be claimed by charity via gift aid ?

Dave12335
Posts: 21
Joined: Sat Feb 09, 2019 10:09 am

Can CGT paid during estate administration be claimed by charity via gift aid ?

Postby Dave12335 » Fri Mar 15, 2019 10:39 am

Hi all, I've searched for the answer but didn't get far, and would be grateful for any insight that can be given. The following is anonymised.

A beneficiary wishes to gift their share of an estate to a charity. They wish to design the gift to make it as effective for the charity as possible and get the most out of the tax system.

A deceased has left a sizeable farm to a number of beneficiaries. The executors are selling the farm to property developers during the administration of the estate. A gain arises on the farm. CGT is being reported and paid over to HMRC by the executors following disposal of the farm. The beneficiaries will receive two cash payments, one in 2019 and one in 2020.

The question is: if the beneficiary gifts the cash they receive to charity, can the CGT be reclaimed by the charity via the gift aid system ? Any explanation much appreciated.

There is probably no prospect of redirecting their interest directly to charity under a deed of variation, unless this would make a difference to the above.

darthblingbling
Posts: 213
Joined: Wed Aug 02, 2017 9:09 pm

Re: Can CGT paid during estate administration be claimed by charity via gift aid ?

Postby darthblingbling » Fri Mar 15, 2019 11:10 am

Is the charity registered as a charity with HMRC.

How large a donation are we talking?

AGoodman
Posts: 743
Joined: Fri May 16, 2014 3:47 pm

Re: Can CGT paid during estate administration be claimed by charity via gift aid ?

Postby AGoodman » Fri Mar 15, 2019 11:35 am

If the beneficiary just gives cash to the charity on these facts then no, simply because there is no provision for relief in these circumstances. The beneficiary does not have a tax liability.

However, the beneficiary and charity will be able to claim gift aid - the beneficiary will be able to claim relief against higher rate/upper rate income tax and any personal capital gains tax. The charity will be able to claim an additional 25% on top of the sum gifted provided the beneficiary did actually have income/gains to the level of the donation (or thereabouts).

The alternatives are that:

1. The executors distribute the farm and the beneficiaries make the sale (the executors could become nominees for this purpose to keep the beneficiaries off the documents). The beneficiaries incur the gains themselves, benefit from an annual allowance and can set gift aid against their CGT.

2. A deed of variation whereby the beneficiary varies his interest in favour of the charity. The executors would have to "assent" the share of the property to the charity in some way. This could be combined so that all beneficiaries, including the charity, receive their share.

Dave12335
Posts: 21
Joined: Sat Feb 09, 2019 10:09 am

Re: Can CGT paid during estate administration be claimed by charity via gift aid ?

Postby Dave12335 » Fri Mar 15, 2019 12:43 pm

Many thanks both, understood.

AGoodman - just to clarify, in the deed of variation alternative you mention, did you mean the property interest is passed directly to the charity or the net sale proceeds ? If the latter, I expect CGT would still arise, is that right ?

AGoodman
Posts: 743
Joined: Fri May 16, 2014 3:47 pm

Re: Can CGT paid during estate administration be claimed by charity via gift aid ?

Postby AGoodman » Fri Mar 15, 2019 1:48 pm

It would have to be before so that the executors could assent a share of the property to the charity prior to the sale.

Some of this is complicated so you would need to ensure that the cost matches the value/tax involved.

Dave12335
Posts: 21
Joined: Sat Feb 09, 2019 10:09 am

Re: Can CGT paid during estate administration be claimed by charity via gift aid ?

Postby Dave12335 » Sat Mar 16, 2019 4:24 pm

Many thanks again, it’s greatly appreciated.


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