The Law Society today reminded private client solicitors that the Finance Bill is set to restrict charitable tax reliefs to UK charities only, with donations located in the EU and the European Economic Arena (EEA) no longer qualifying for UK charitable tax reliefs from April 2024. This will impact individuals who claim income tax or capital gains tax relief on donations to non-UK charities and those who expect inheritance tax exemption on lifetime gifts or on legacies to such organisations.
'Members of the profession need to be aware of how the Finance Bill could affect them,' Society president Lubna Shuja said. 'Firms will have to consider whether they have wills which need to be revised and to be aware that there is now a reduced pool of organisations which will qualify as a charity.”
The Law Society also called on the government to extend its full corporation tax expensing policy – which is also in the Finance Bill – to the legal sector.
Shuja said: 'Many law firms operate under the partnership model and as such partners are taxed individually. This means they do not pay corporation tax and so cannot access the scheme. This creates an odd situation where an insurance company could invest in IT and receive the allowance, but a law firm next door doing the same thing would be unable to do so.
'Extending full expensing to cover law firms would unlock further investment in one of the UK’s most productive sectors. Legal services add £60bn to the UK economy annually and employ 1.1% of the UK labour force.'
The Society said it is encouraging firms and solicitors to:
- Consider whether they have wills which need to be revised and be aware that there is a reduced pool of organisations which will qualify as a charity.
- Think about past clients and existing clients and how the changes will impact those arrangements.
- Ensure firms are aware that changes have been implemented (subject to transitional provisions in some cases). They will have an impact across all of the tax world.