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In 2017/18 HM Revenue and Customs collected £5.2 billion in Inheritance Tax, but did you know that ex-service personnel may be exempt from paying this? Our tax, trust and estate expert, Catherine Angel, takes a closer look.

The total number of estates liable to pay Inheritance Tax has increased every year since 2009 despite the introduction of new allowances such as the transferable nil rate band and the residence nil rate band.

Everyone has an Inheritance Tax personal allowance, meaning they can leave an estate up to the value of £325,000 before they pay any Inheritance Tax, which is then charged at a flat rate of 40%. Since 2007 spouses have been able to transfer any unused allowance from the estate of the first spouse who passes away to the estate of the second spouse.

Despite all these changes Inheritance Tax receipts have still increased. However, estates of ex-servicemen and women who have died from injuries sustained while on active service can qualify for exemption from Inheritance Tax.

So how does it work?

The rules state that if a serviceman or woman dies while on active service their estate will be exempt from Inheritance Tax. This is also the case if they pass away many years later from an injury or illness they sustained while serving.

We were recently instructed by the family of an elderly man who had completed National Service back in 1948, having served aboard two minesweepers. After completing his National Service he had a very successful career in the City. Sadly, two years before his death in 2017, he underwent some medical investigations and was diagnosed with mesothelioma.

Mesothelioma is a fatal disease which develops after exposure to asbestos, yet it often doesn’t present itself until many years later. It was a known fact that asbestos lagged pipes were present on the minesweepers and therefore it was highly likely our client was exposed to the dusts while on board. We established that our client was exposed to asbestos on active service some 69 years ago and that he subsequently contracted mesothelioma. Once our evidence was accepted by the Ministry of Defence they issued a certificate to confirm that the exemption to Inheritance Tax should apply, which led to a full refund by HMRC to the estate.

We have military and tax specialists on hand to help with issues like this. By being aware of this exemption, medical and other evidence can be collected and stored with a Will supporting any future claim, should it arise.

Published: April 2019

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Spring 2019

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Catherine Angel

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