- Compensation exempt from Inheritance Tax, Capital Gains and Income Tax - Lawyers warn those eligible must plan ahead to avoid IHT on payouts - Tax exemptions could be lost without careful planning

Lawyers at Irwin Mitchell are urging those eligible for the infected blood compensation scheme to obtain the right advice to ensure any compensation is exempt from Inheritance Tax, Capital Gains Tax and Income Tax.

The scheme, which, as announced in May, will financially compensate those who received blood or tissue infected with HIV and/or Hepatitis C from the NHS between 1970 to 1991. More than 30,000 people in the UK were infected and more than 3,000 have since died.

On 23 August 2024, the Government laid regulations to establish the Infected Blood Compensation Scheme. They give the Infected Blood Compensation Authority (IBCA) the powers to pay compensation to victims (living and deceased) and the first payments are expected to start by the end of 2024. Lawyers at Irwin Mitchel warn:

• The victims in receipt of compensation will need to consider how they deal with the money they receive and ensure that they put succession plans in place.
  
  
• The amounts received have the potential to affect the means-tested benefits victims and their families might receive and could affect the way that their care is funded in the future.
  
  
• Payments under the scheme are free of Income Tax, Capital Gains Tax and Inheritance Tax, but the victim, or their personal representatives will need to plan ahead to ensure that the exemptions apply to their estates.

Expert Opinion

“These long awaited payments will finally be made to those who have suffered as a result of the scandal, but sadly for some it will be too late. If an infected person has already sadly died, their personal representatives will need to obtain a Grant of Representation to claim their compensation. HMRC have introduced a simplified procedure to make this process easier for victims and their families.”

“It has also not been widely publicised that in order to ensure these payments are exempt from inheritance tax, the victims and their families need to seek tax planning advice. In addition to this, it’s important those who receive payouts get the right advice about funding their future care to ensure that this exempt money isn’t swallowed up by other living costs later in life.” Kate Maybury, Wills, Trusts and Estates Solicitor