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Robert Lillycrop explains the inheritance tax reliefs for emergency service and armed forces personnel.

Since the Stamp Act of 1694 there has been an exemption from death duties for the estates of armed forces personnel who die in the service of the Crown. In his 2014 Budget, chancellor George Osborne announced the government’s intention to extend the current exemption in s154, Inheritance Tax Act 1984 (IHTA 1984) to emergency service personnel.

The necessary legislation was introduced in Finance Act 2015 and covers deaths occurring on or after 19 March 2014 for emergency service personnel, police constables and armed service personnel who die as a result of being attacked due to their status.

The effect of these changes will be to exempt from inheritance tax (IHT) the estates of people who qualify for relief under these changes, as well as relieve any additional IHT due on death for lifetime transfers and potentially exempt transfers.

Many professional advisers are unfamiliar with these reliefs, which may be a contributing factor to the historically low number of claims. The briefing sets out the rules and I would encourage members to raise awareness of these reliefs wherever possible.

Death of emergency service personnel

The new relief in s153A, IHTA 1984 applies where a person:

  • dies from an injury sustained, accident occurring or disease contracted at a time when the person was responding to emergency circumstances in that person's capacity as an emergency responder; or;
  • dies from a disease contracted at some previous time, the death being due to, or, hastened by, the aggravation of disease during a period when the person was responding to emergency circumstances, in that person's capacity as an emergency responder.

This is an extract from an article in the February 2016 edition of TAXline, the magazine of the Tax Faculty.

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