TT154: Inheritance Tax relief for War Veterans

August 23, 2010

<em>Any member or ex-member of the armed forces will know of the so-called ‘covenant’ that is supposed to exist between the military and the country which they serve.</em>

In exchange for the dangers and sacrifices that such people put themselves through, the country promises to look after them.

An often unknown provision of the Inheritance Tax Act forms part of this covenant.  In brief, there is an exemption from Inheritance Tax (“IHT”) for anyone whose death was caused by injury or disease received or aggravated while he or she was on active service.

This need not mean that death need occur on active service itself. If an injury or disease is received on active service and the individual later dies from that injury or disease, the exemption would still apply.

One can easily imagine that a disease such as malaria could be the cause of death many years after contracted and many years after military service had ended.

Such circumstances could still be a cause for a claim to the exemption.

As well as veterans of WWII, there are now veterans of many campaigns, such as Malaysia, Korea, Suez, the Falklands, Northern Ireland and more recently Afghanistan and Iraq.

If any suffer from a condition caused whilst on active service which may be a factor in their eventual death, then the exemption could be claimed.

The exemption is not limited to members of the armed forces, being also available to anyone who “not being a member of any of [the armed forces] was subject to the law governing any of those forces by reason of association with or accompanying any body of those forces.”

Any veteran should record and confirm any condition that adversely affects their health, perhaps in consultation with their family doctor prior to drawing up a will.

Any death certificate should properly record the extent to which the injuries or disease contributed to death.

Following death, an application must be made to the MOD so that a certificate can be issued which can be presented to HM Revenue &amp; Customs to ensure the estate can be passed on to relatives and loved ones free of IHT.

This is of course a sensitive issue but one worth considering when drawing up plans how an individual’s estate should be dealt with after death.  Having already made sacrifices to support one’s country, it would be comforting to know that those sacrifices were recognised by the taxman!

If you feel that you or someone you know may be able to benefit from this exemption, please get in touch with your Barnes Roffe LLP contact partner or with any member of our specialist tax team.

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