IHT Exemption for NHS Workers

Under Appreciated Pension Scheme Case Rides to the Rescue of a Little Known IHT Exemption, All to the Benefit of NHS Workers

For anyone who deals with IHT on day to day basis, it is widely known that there is a general IHT exemption available for armed forces personnel who die as a result of active service/combat.

However, hidden away in section 153A of the Inheritance Tax Act is an additional exemption which applies broadly where an “emergency responder” dies from an injury, accident or disease contracted as a result of responding to “emergency circumstances”.

This little known IHT exemption has been with us since March 2014 and is obviously now of great importance for front-line NHS workers as it can provide the security that their death Estate – and lifetime gifts – can be passed to their loved ones without suffering the burden of IHT.

However, as it currently stands, HMRC guidance looks to provide an additional onus on the personal representatives to demonstrate the availability of the exemption where “personal representatives should provide such evidence as is available to show that the deceased’s death was as a result of, or was hastened by, their being an emergency responder who was responding to emergency circumstance” (HMRC Manual IHTM11295).

This is very much restrictive and may deny the exemption when it is most clearly applicable e.g. in respect of NHS workers who succumb to the coronavirus but are unable to demonstrate precisely where they were infected.

We would not consider this to be in the spirit of the legislation to which it relates, and we do not think this will hold up to scrutiny in a court of law.

Aptly, the deficiencies in HMRC guidance have never been more clearly demonstrated than in the recent case of HMRC v Sippchoice (our hero in this piece).

As part of the decision, a clear and easy to follow principle was outlined:

“Statements in HMRC’s manuals are merely HMRC’s interpretation of the law in their internal guidance and they do not have the force of law. We must interpret the legislation in accordance with the principles of construction described above and if we conclude, as we have, that the legislation bears a different meaning to that found in the HMRC manual, the legislation must be preferred.”

HMRC guidance is not gospel. The onus is to self-assess.

In light of the current pandemic, it is clear the HMRC guidance does not match with the reality of the law and the application of this exemption should be considered much wider than is envisaged by HMRC’s guidance.

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