The usual 40% rate of inheritance tax will now be reduced to 36% if at least 10% of an individual's taxable estate is left to charity on their death.

Now those who are already charitably minded can leave more of their estate to charity and their family will end up with more. Everyone wins, courtesy of the taxman. The way the new reduced rate is calculated means that if someone is already thinking of leaving at least 4% of their taxable estate to charity, they could increase this legacy to 10%. More then goes to charity but the family will still receive the same inheritance, or more, once the tax reduction is taken into account. The detailed rules are complicated but a well-drafted will should ensure the relief applies.

This is an excellent opportunity for people to save tax and benefit charity and an excellent marketing opportunity for charities. Anyone with a will that includes any sort of charitable legacy should review it to see if they currently benefit from the new relief. If not, then they should consider increasing the size of the charitable legacy so that their estate benefits from the relief, especially as this could even save their family money overall.

Even if someone does not currently make a legacy to charity in their will, it is still worth recommending that they consider doing so, as the actual cost to their family could be far lower than they expect.

For more information, please contact Andrew Goldstone.
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100 of the richest people in Britain donated at least 1% of their wealth in the past year. This is the first time in 11 years of publication of the Giving List that this has occurred.

Overall, donations or pledges from the top 100 philanthropists increased £220 million to £1.89 billion from £1.67 billion last year – a 13% rise.

Despite the encouraging figures, commentators have sounded a cautionary note. Their concern is that these excellent figures were generated in a tax regime that was stable and benevolent, with less claims of tax avoidance being levelled at philanthropists.

Some have also pointed to the US as an example of how even higher rates of giving can be generated where there are more generous tax breaks for philanthropists.

For more information, please contact Andrew Goldstone.
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After coming under sustained pressure from the charity sector and philanthropists the government has abandoned its controversial proposals to cap overall tax relief for individuals at £50,000 or 25% of the individual's income.

Charities had widely criticised the proposed measure, claiming that philanthropists would be discouraged from donating where it would cost them more to do so. Whilst it is true that those who donate to charity are not purely motivated by tax saving, removing the tax incentive for doing so at a time when many charities are either struggling to survive or facing an increased demand for their services did not seem to chime with the government's vision of the "big society".

So the current rules for charitable donations remain unchanged. If a top rate tax payer gives £80 to charity, the charity claims back £20 and the tax payer can claim back £30 in tax relief. The charity ultimately receives £100 but it costs the donor just £50. This reflects the availability of full 50% tax relief on the donation.

For more information, please contact Andrew Goldstone.
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Mishcon de Reya has undertaken a detailed review of over a thousand of its clients’ wills to examine trends in charitable giving.

Legacies

We have looked at the value and type of legacies given to charity, the likelihood of the charity ever receiving the legacy, whether clients prefer to give to multiple charities and which charity sectors are the most popular for our clients.

20% of our clients mentioned charity in their wills but only 11% included a legacy which will go to charity immediately on their death. Half of our clients who mentioned charity in their wills mentioned more than one charity.

This means that only a small proportion of clients include any provision for charity in their will and in half of those cases the legacy is shared between several charities.

Almost half of the legacies to charity were cash gifts and almost half were gifts of part or all of the residuary estate. Although residuary gifts are generally considered the holy grail for legacy officers, what matters most to charities is the value of the legacy and whether they will receive it.

Interestingly, only 1% of clients included a charitable legacy of all or part of their residuary estate which will take effect immediately on their death. That contrasts with 9% of clients who included at least one cash legacy to charity which will take effect immediately on their death.

Most cash legacies were less than £10,000 but 8% were over £50,000. Although cash legacies are generally likely to be less valuable than a share of the residuary estate, a far larger proportion of cash legacies take effect immediately on the testator’s death; 67% as opposed to 9% as set out above. As far as charities are concerned, the old adage “a bird in the hand” may well be relevant.

Only 8% of cash legacies were index-linked but this is something we are trying to increase by routinely recommending index-linking to testators. Gifts of specific items (specific legacies) to charities are unusual and make up just 5% of all charitable legacies. Fortunately, they mostly take effect either immediately on the client’s death or if just one other individual has died before the client (often the spouse in a mirror-will scenario). This may reflect a testator’s strong wish for the charity to receive the specific item. Charities might therefore consider focusing their legacy campaigns on encouraging valuable specific legacies, although only one of our clients made a gift of real estate.

Wills vs Letters of Wishes

There is a move towards will-drafting involving flexible trusts and non-legally binding letters of wishes for reasons of tax efficiency, flexibility and confidentiality. Is this a good thing for charities? Can a charity rely on the trustees’ discretion? Will the trustees always follow the testator’s wishes set out in a letter of wishes that a legacy should pass to charity?

In a professional context, especially where the solicitors or trusted family advisors are also executors, we would ordinarily expect a charitable legacy to take effect if it is set out in a letter of wishes. However, the letter of wishes is not a public document and it can be changed after the client has made their will. Indeed this flexibility and confidentiality means that discretionary trusts with letters of wishes are popular with our clients, but they are not ideal from the point of view of a charity wanting to be sure of a legacy or even to be aware of the possibility of a legacy.

We undertook a review of gifts of the residuary estate in wills and separately in letters of wishes in order to be able to compare the two different approaches.

In wills the most common percentage of residuary estate left to each charity is between 26% and 50% of the estate. 23% of clients making residuary gifts in their wills leave the entire estate to charity. However only 11% of residuary gifts made in wills go to charity immediately on the client’s death and 25% if just one other individual has died before the client (again, often the spouse in a mirror will scenario). As a result only a total of 36% of residuary gifts made in wills are quite likely to reach the charity.

In letters of wishes, by comparison, the most common percentage of residuary estate left to each charity is less than 10% of the estate. Only 8% of clients making residuary gifts in letters of wishes leave the entire estate to charity. Only a tiny number (2%) of residuary gifts made in letters of wishes go to charity immediately, but 72% go to charity if just one other individual has died before the client (again, often a spouse in a mirror-will scenario). This means that 74% of residuary gifts made in letters of wishes are quite likely to reach the charity.

In conclusion, where charities are given residuary legacies under a letter of wishes, they are likely to receive a smaller share of the estate than by a gift in a will, they are more likely to have to share the estate with other charities, but they are also more likely actually to receive the legacy.

Our analysis shows that if a testator has a strong connection with one particular charity then they are more likely to give their entire estate to that charity. Once they begin thinking about more than one charity then the chosen charities are highly likely to have to share the residuary estate with other non-charity beneficiaries (such as the client’s nieces and nephews).

The most popular charitable sector for our clients was health (36% of legacies) followed by religion (12%), children and education (10% each) and animals (8% of legacies).

To view the full report, click here.

If you wish to discuss the findings, please contact Andrew Goldstone or Victoria Turner.

The Supreme Court recently handed down its judgment in the long running retirement case of Seldon v Clarkson Wright and Jakes. The case has been closely watched by employment experts, particularly since the default retirement age was abolished last year in the hope that it would provide guidance on when it may be acceptable to impose a contractual retirement age on employees.

Mr Seldon, a partner in a law firm, had complained that his firm discriminated against him by forcing him to retire at 65. However, the Supreme Court Judges agreed with Clarkson Wright and Jakes that the reasons it identified for imposing a retirement age for its partners (namely staff retention, workforce planning and preserving the dignity of older workers by limiting the need for performance management) were justifiable.

This decision gives employers some comfort that, provided an employer has sufficient evidence that a company retirement age will achieve (in their particular business) the sort of aims accepted by the Supreme Court, a contractual retirement age may not be discriminatory. However, an employer must also show that the choice of specific retirement age is a proportionate means of achieving those aims. In Seldon, 65 may be considered reasonable because it was the default retirement age at the time (this question has been referred back to the employment tribunal to decide). But with no default retirement age to rely on, and with the state pension age steadily rising, how will employers know which age to choose? With more and more people either eager to carry on with their careers, or forced to work longer for financial reasons, we will no doubt be seeing more retirement cases in the future.

Commentary provided by Laura Garner.

A number of changes to employment legislation came into force in April 2012. These impact upon all charity employers. The changes are driven by the Government's stated aim of reforming employment law to assist business and boost economic recovery, and are the result of the Government's Resolving Workplace Disputes consultation on reforming the employment tribunal system.

The following changes to employment legislation took effect from 6 April 2012:

1. Unfair dismissal qualifying period - The qualifying period for bringing a claim for unfair dismissal has increased from one year to two years. The new qualifying period only applies to employees whose employment begins on or after 6 April 2012, while those who are already in employment before that date will retain the current one-year qualifying period.
2. Changes to Employment Tribunal procedure – While a comprehensive review of the Employment Tribunal Rules is currently underway, the following changes to employment tribunal procedure were implemented from 6 April:
   • Deposit Orders – If a tribunal or judge considers that all or part of a claim or response has little reasonable prospect of success, the party can be ordered to pay a deposit as a condition of proceeding with that part of their case. The maximum amount of a deposit order has increased from £500 to £1,000.
   • Costs Order – The maximum amount of a costs order, which a tribunal may award in certain circumstances in favour of a legally represented party, has increased from £10,000 to £20,000. The tribunal retains the ability to refer cases to the County Court for assessment.
   • Witness Statements – Tribunals in England and Wales usually order the parties to provide written witness statements before the hearing. Previously, witnesses were generally required to read out their statements as their evidence-in-chief. From April 2012, witness statements are now to be taken as read in the tribunal, unless a judge directs otherwise.
   • Witness Expenses – In its response to the consultation, the Government set out its decision to withdraw state funding of witness expenses. Employment Tribunals have the power to direct that parties to a dispute are responsible for paying witnesses' expenses and that the party who loses the case should reimburse the successful party for any such costs already paid out.
   • Judges to sit alone on unfair dismissal cases – Unfair dismissal claims were previously heard by an 'industrial jury' of a legally qualified Employment Tribunal Judge and two lay members. From April, Employment Tribunal Judges will hear all unfair dismissal cases alone in the Employment Tribunal without lay members, unless they direct otherwise. This change will be reviewed after a year to check on its progress.
3. New statutory payment rates – finally, the following increased rates of statutory benefits have applied since early April 2012:
   • The standard rates for statutory maternity pay, paternity pay and adoption pay have increased from £128.73 to £135.45. The weekly earnings threshold for these payments has been raised from £102 to £107.
   • Statutory sick pay has increased from £81.60 to £85.85, with the weekly earnings threshold also rising from £102 to £107.
   • Maternity allowance has increased from £124.88 to £135.45, with the earning threshold remaining at £30.

For further commentary on some of the above changes please click here.
For more information, please contact Laura Garner.

The London 2012 Olympic Games is fast approaching. Of utmost concern to employers will be the need to minimise the effects of the Games on work productivity. To address this concern, employers have to first identify the array of hurdles they will face. A number of these hurdles are outlined below.

Time off work for volunteers and attendees

Some employees may have secured volunteer positions which will require them to be available for the entire duration of the games, as well as training prior to the games.

Employers will need to consider and communicate the following to employees, sooner rather than later:

• The basis on which leave will be granted for the Games – this could be on a first come first served basis. However, an element of subjectivity will need to be retained so that, for example, 5 members of the same team are not out of the office at the same time. This would apply equally to the granting of holiday under normal procedures, not just for volunteers;
• Whether employees will be required to use their holiday allowance to take any time off or whether there will be any opportunity for employees to take unpaid leave; and
• Whether the employer will implement any special leave policy for the Games, such as giving employee volunteers the first 2 or 3 days off as paid leave. The employee can then use their holiday allowance to satisfy the remainder of their leave requirement.

It will also be important for employers to identify employees who serve in the territorial army as such individuals may be required to assist with the Olympic security detail. Such individuals may be mobilized for a month, with a minority being mobilized for three months and it is currently envisaged that "Call Out Orders" will be sent to employers 60 days before the mobilization.

Provisions for employees at work

Employers will need to consider the potentially increased use of internet and social networking sites during work hours. This will undoubtedly affect employee concentration and productivity. Employers may choose to disapply their usual Internet and Email policy and adopt a policy for the Games, for example, an employer may prohibit the use of the internet completely and provide a TV screen in a designated area in the office for screening major Games events. On the other hand, employers may ban the streaming of videos only or designate a period in which employees can stream videos on their computers.

Employers will be able to utilize their disciplinary procedures to deal with any performance issues that arise during the Games and may wish to communicate this to employees.

Flexible working and transportation problems

The level of disruption to London's transportation network will be a difficult problem to assess until the Games begin. However, it is important to be alert to possible problems and if necessary, be ready and able to implement a flexible working plan.

Important considerations relating to flexible working include:

• The number and type of employees that could work effectively from home without too much disruption to the business;
• Any additional equipment that will be required for employees to work from home, such as company laptops and blackberries;
• If applicable, whether it will be more cost effective in both the short and long term to invest in a remote access system so that employees can work from home on their own computers;
• Whether the employer needs to conduct risk assessments for employees working from home. The provisions of the Health and Safety at Work Act 1974 apply to employees working in their own homes; and
• Whether the employer has the legal ability to vary employee working hours during the Games (a possible solution to the transportation problem could be altering employee working hours so that they arrive at the office before or after the Olympic rush hour). However, bear in mind how any change may affect disabled employees or those with caring responsibilities.

Spurious sickness absence reports

There will undoubtedly be a number of employees who, at the last minute, decide to take time off work to enjoy the Games and do this by feigning sickness. It will be important for employers to remind employees of its sickness absence policy and employees' obligations under the policy.

If not already contained in the employer's existing policy, employers may want to:

• Ensure employees report any sickness absence directly to a manager by telephone (they cannot send text messages, leave voicemails or inform other employees);and
• Require employees to undergo a return to work interview following any period of absence.

Employees should be informed and/or reminded that suspected cases of spurious sickness absence will be investigated and as would normally be the case, false reports will be subject to discipline. However, it is important for employers to consider such communication carefully in order avoid the negative connotations that employees may draw (i.e. that their employer thinks the worst of them).

Early communication with employees about the Games will also help to reduce this problem as it will encourage employees to consider and deal with their need for holiday early on.

Flexibility and Fairness

Whatever policies and procedures an employer decides to put in place for the Olympic Games, it is important that such policies are exercised fairly and proportionately. An employer's perceived fairness and flexibility will generally encourage the same level of understanding and respect from its employees.

Conclusion

In all, open and clear communication will be crucial to successfully managing a workforce during the Olympic Games. The earlier such communication happens the better, as employers will discover their employees' intentions early and be able to assess needs, to some extent at least, during the Games.

ACAS (Advisory, Conciliation and Arbitration Service) has issued guidance on how to deal with issues arising from the Olympic Games in the summer. Please click here to access ACAS' guidance.

For more information, please contact Laura Garner.

Constance McDonnell regularly represents parties in will challenge cases and will be speaking about the most recent development and decisions in case law relevant to charity legacies and contentious probate for charities.

Constance will discuss the recent proprietary estoppel case of Shirt v Shirt, which involved a claim for ownership of a family farm, the "big money - short marriage" 1975 Act claim of Lilleyman and other developments, including the recent "death-bed will" case of Wharton v Bancroft in which Constance successfully represented the Claimant.

To register for this event, please click here.

This is an open invite so please feel free to invite colleagues interested in the event.

Tamasin Perkins and Victoria Turner will be hosting a session at the Institute of Fundraising National Convention 2012.

Mishcon de Reya has undertaken the most detailed analysis ever by a firm of solicitors of its clients' wills to analyse charitable legacy giving. Victoria Turner will be taking you through the report and its findings which will provide valuable insight for you when considering your fundraising strategy.

In addition, Tamasin Perkins will be speaking about what can be learned from recent cases including the landmark decision in Gill v RSPCA and giving practical advice on what to consider and how to act in the event that your organisation becomes involved in a probate dispute.

To view the full report, click here.
To book a place for this session or for information, please click here.