There was a fascinating article in the Mail on Sunday in July last year on war veterans who were wounded or fell ill on active service and who could be exempt from Inheritance Tax if it could be proved after their death that they died as a result, even indirectly, of their injuries. A law firm in the West Country saved a family £1 million!
This exemption is contained in section 154 of the Inheritance Tax Act 1984 and applies where a person was a member of the armed forces and was on active service against an enemy (or other warlike nature involving the same risks, in the opinion of the Treasury). It provides that there will be no Inheritance Tax charged on the estate of a person certified by the Ministry of Defense or the Secretary of State as having died from a wound inflicted, accident occurring or disease contracted while on active service, or a disease contracted at some previous time, the death being due to or hastened by the aggravation of the disease during active duty.
World War veterans are not the only possible claimants. There are many families who have had relatives who have served in other conflicts such as Aden, Malaya, Korea, Northern Ireland, the Falklands and more recently in Kuwait, Iraq and Afghanistan.
A slightly bizarre side to all this, is that it is impossible for any potentially eligible ex-servicemen and women to know whether their estate will be exempt. The decision will be made after their death and for this reason it is extremely important that their death certificates should list all causes of death. To ensure that this is done, the family doctor should be informed about this issue and veterans should put together a dossier of medical evidence and a detailed statement of wounds and/or diseases and keep records. With these documents, beneficiaries will be able to appeal to the MOD to get the Inheritance Tax refunded.
In most cases the Inheritance Tax will have to be paid in order for the family to get probate. The appeal comes after that. It must be made clear that this exemption only relates to Inheritance Tax payable on the estate of the deceased veteran; it does not relate to any other tax or duty payable for example on a lifetime transfer or when a discretionary trust comes to an end on death.
A positive outcome on the claim is usually dependent on how a case is put together, so any veteran who thinks that they may qualify should seek advice as soon as possible. To claim the exemption, it is essential to obtain a certificate. There are two forms of certificate: a simple one for deaths of currently serving individuals where there is no doubt that section 154 is satisfied and one for other deaths. Paragraph 11291 of Revenue & Customs IHT manual deals with the procedure for claiming exemption. Applicants should request certificates from Wendy Gower, JCCC Deceased Estates, Room 115, Building 182, RAF Innsworth, Gloucester GL3 1HW and should send them to the MOD along with the deceased’s service number, a copy of the death certificate and any supporting medical evidence that seems relevant, such as a postmortem report.
By concession, the exemption has been applied in the past to the estates of members of the Royal Ulster Constabulary who died from injuries caused in Northern Ireland by terrorist activity.
“It’s never too early to make a Will but often too late” – Jaci
