There is a little-known exemption from Inheritance Tax (IHT) for emergency services personnel, known as the blue light exemption.
The legislation initially applied when a member or former member of the armed forces died as a result of injuries or disease sustained while on active service. Their whole estate would be exempt from the payment of IHT. As you can imagine this exemption does not apply very often and so it can be overlooked!
The Finance Act 2015 extended the exemption to cover individuals who work in emergency situations. In particular Section 153A of the Inheritance Act 1984 extends the IHT exemption to the estate of an emergency responder if they die as a result of:
- An injury sustained, accident occurring, or disease contracted at a time when that person was responding to emergency circumstances in that person’s capacity as an emergency responder, or
- A disease contracted at some previous time, the death being due, to or hastened by, the aggravation of the disease whilst responding to emergency circumstances in that person’s capacity as an emergency responder.
Emergency responders are identified as being emergency services personnel (for example persons employed in providing fire services, medical, ambulance or paramedic services or police, and services for the transportation of organs, blood and medical equipment amongst others). The exemption also applies to those providing humanitarian assistance.
Of course, the key word for the current situation is “disease”. Therefore, the estate of NHS workers and other emergency services personal should be exempt from inheritance tax if the deceased dies from COVID-19.
Not having to pay the IHT will never, ever make up for the loss of a family member, but it is a small acknowledgement of the amazing sacrifice that emergency services personnel are making every single day during the COVID-19 crisis.
The exemption is likely to benefit older, more senior members of staff as they typically have built up more assets over time. It will also of course help those recently retired members of staff who have now come back to help in this crisis.
This is a very technical area of the law and should you require further assistance with Blue Light Exemption or any Inheritance Tax queries please don’t hesitate to contact us.
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Vanessa is a Solicitor specialising in Wills, Lasting Powers of Attorney and the administration of estates.