⚠️ We are working hard to ensure this guidance is up to date. However, you should bear in mind that things may change as the government respond to the ongoing situation.
Coronavirus: inheritance tax exemption: death of emergency workers and those providing aid
Exemption from inheritance tax may be claimed where emergency workers and some care workers contract the coronavirus (or die in other circumstances) while performing their duties. As discussed below, we believe this might also apply to some volunteers responding to the pandemic.
When does inheritance tax (IHT) usually apply?
Most estates in the UK do not pay inheritance tax (IHT) because either the value of the estate is below the threshold or the estate is passed to a surviving spouse or civil partner.
You can read more about IHT and the threshold in our bereavement section.
If IHT is chargeable, certain reliefs and exemptions can apply to reduce or eliminate the tax due.
Which emergency workers can qualify for IHT exemption?
Doctors, nurses, paramedics, ambulance drivers, and others providing medical services can qualify for exemption if they are responding to an emergency in the course of their duties. This could include responding to the coronavirus emergency.
The exemption applies to those ‘employed or engaged in’ such work, which means it does not matter if the person was an employee, self-employed or a volunteer.
The position for social care workers is rather complicated, as the exemption can be applied to those providing ‘humanitarian assistance’ but only where they are employed or engaged by a government or charity.
This would appear to mean that carers employed or engaged by an individual or family, and those who work for commercial organisations, like privately-owned care homes, might not qualify. It is also not clear whether those employed by local authorities may qualify as local authorities may not be included within the term ‘government’. However, those in this situation should consider taking professional tax advice as there might be some grounds for arguing for the exemption to be applied.
HMRC’s Inheritance Tax Manual at IHTM11292 gives some further information on the meaning of emergency workers for this purpose. It is interesting to note that this says:
“The reference to humanitarian assistance will include those engaged in providing food distribution, shelter, medical care, transport services, administrative roles, telecommunication services, civil engineering services etc in an area affected by a natural disaster…”
This could suggest, for example, that those who signed up for the NHS ‘volunteer army’ to help those with needs such as delivery of medical supplies could be considered as being within the exemption. It might also cover non-medical NHS staff who, although not directly providing front-line medical services, nevertheless contracted coronavirus through their workplace.
What other conditions need to be satisfied?
The IHT exemption being discussed here applies where a disease (including the coronavirus, Covid-19) is contracted at a time when that person was responding to emergency circumstances in that person's capacity as an emergency responder. Given the nature of the coronavirus pandemic this can apply to many different circumstances.
It can also apply to emergency responders being killed in an accident while doing their duty. So it might be that the exemption should be considered if, for example, an NHS Volunteer Responder sadly dies in a car accident in the course of delivering medication.
What does the exemption cover?
It covers any estate liable to UK IHT and includes any inheritance tax that might become due on transfers made by the deceased within seven years before their death.
Unfortunately, the guidance on page 5 of the notes to form IHT 400 (inheritance tax account) says that ‘the exemption does not cover lifetime gifts’. This is incorrect, as the law (section 153A(2) IHTA 1984 – see below) and HMRC’s internal manuals (at IHTM11282) are both clear that the exemption does cover transfers made during the deceased’s lifetime.
How is the exemption claimed?
The exemption is not automatic. The executors or personal representatives of the deceased will need to claim it, although if the exemption applies, a reduced IHT400 may be completed in accordance with page 5 of the notes for completing the form.
They would then make the appropriate claim on pages 10 and 11 of form IHT 400 – noting the claim is for exemption under section 153A of the Inheritance Tax Act 1984 and providing further details of the circumstances of death in the Additional Information box on page 16. Be specific about what duties were carried out, when the virus was likely to have been contracted and any contributing circumstances, for example lack of personal protective equipment (PPE). HMRC may query the claim so the more information that is provided, the better.
Where can I find more information, or get help?
Tax legislation is sometimes difficult to read and understand, but section 153A of the Inheritance Tax Act 1984 is relatively easy to follow. It was introduced in 2015 and can be found on the government’s legislation website.
HMRC’s Inheritance Tax Manual also has some information which you might find helpful, at pages IHTM11291 to IHTM11295 (use the ‘next page’ link to navigate from page 11291 onwards).
If you need assistance with sorting out someone’s affairs when they have died, see our page: Getting help with bereavement and inheritance tax.