With Remembrance Day coming up in the 75th year after the end of World War II, a year which has been overshadowed by current events, there are still reasons and ways the country recognises the work and sacrifices people have made and are still making.
Tax relief for all war medals and decorations
The first exemption to be considered is the relief from tax for medals. Initially the exemption only applied to those medals that were awarded for “valour or gallant conduct”, such as the Victoria Cross, Military Cross and George Cross. If an estate contained other types of medals then it was a requirement, by HMRC, to individually list those medals and decorations that were worth more than £500.
However, the position has changed with effect from 3 December 2014 and now includes all medals and decorations awarded by the crown or another country outside of the UK to armed forces, emergency services personal and individuals “for, or in connection with, public service or achievement in public life”. This has therefore substantially widened the scope of this relief in not only the “type” of medal but also to a wider audience. Therefore if the above conditions have been met, then there is no longer a requirement to individually list these items.
This exemption may not result in a substantial reduction for the estate or a subsequent tax liability, as it depends on the type of medal and award. Nevertheless, it is sign of recognition to the support and sacrifices made by an individual. So let us take Captain Tom Moore, who has gained public recognition for his recent fund raising efforts, as an example. For his wartime service with the “Forgotten Army” (Fourteenth Army) he was awarded with the Burma Star as well as the 1939-1945 Star, War Medal 1939-1945 and the Defence Medal. In addition to this he now has been awarded with the Knight Bachelor. All these awards are now captured under the new rules and are now exempt from inheritance tax.
Estates benefits for fatal injuries whilst on active service
The second exemption is of a potential greater benefit to certain estates as it covers those estate where the death was attributed to or hastened by one of the following:
- Injury or illness suffered whilst on active service; or
- Where someone already has a pre-existing disease which is aggravated by the wound inflicted, accident occurring or disease contracted whilst on active service.
The scope of this relief has now been widened to include not only members of the armed forces but also those from emergency services and constables and service personnel that have been targeted as a result of their jobs. The above-mentioned changes to the exemption only apply for deaths that occurred after 19 March 2014
By way of an example someone who in the 1950s did their national service with the RAF based in Cyprus and who in later life developed melanoma skin cancer may be able to argue that this cancer was due to their service time. Long prolonged and unprotected time under the sun could have resulted or otherwise aggravated the development of cancer.
More recently PC Keith Palmer who become a victim of the Westminster attack on 22 March 2017 clearly became a victim whilst serving with the Police. Providing the necessary requirements are satisfied then this can have a substantial impact on the tax position of their estate as it could stop failed gifts (Potential Exempt Transfers) becoming chargeable transfers on death and otherwise a tax charge arising on the estate passing on death. There are strict requirements to be satisfied and if executors would like to avail themselves of this exemption then this will need to be discussed with HMRC who assess any claim on a case by case basis.