An arbitrary – and, for some families, distressing – rule that means inheritance tax applies to some war medals but not others has finally been scrapped.A quirk in the existing tax rules meant that only medals awarded for “valour or gallant conduct” could be passed on down the family line free of inheritance tax. Medals in this category include the Victoria Cross (pictured) and the Military Cross. But, bizarrely, scores of other war medals – including those granted to servicemen who died in countless conflicts including both world wars – were not exempt from death duties.
The anomaly led to individuals such as Rod Gilchrist (see report, below) being required to pay inheritance tax on war medals along with the rest of their late relatives’ estate. The senseless distinction between certain medals and others implied, at least to some families, that the service and sacrifices of their relatives were somehow less significant.
When Mr Gilchrist’s case was highlighted in these pages in August even HMRC acknowledged this potentially distressing implication. A spokesman said that while some medals might be liable to inheritance tax, “this is in no way meant to take away from the intrinsic value of awards recognising the service of all veterans”.
It appears our account was read more widely because, in his Autumn Statement earlier this month, the Chancellor, George Osborne, included a clause that will scrap the distinction between medals. The inheritance tax exemption will apply to all war medals and go even further to include other awards.
It is a victory for Telegraph Money and a further sign that when readers voice their concerns through our articles, ministers listen and react.
The notes accompanying the statement said: “From December 3 2014, it [the exemption] will apply to all decorations and medals awarded to the Armed Services or emergency services personnel, and to awards made by the Crown for achievements and service in public life.”
The change was widely welcomed. The exemption for Victoria and Military Crosses was itself introduced only in 2000, in part because families were having to sell the medals in order to meet the death taxes due on them. Military Crosses and Victoria Crosses were especially valuable, depending on their history and associations, with some being valued at hundreds of thousands of pounds.
In recent years other medals have also increased in value.
Nick Thompson, a medal valuation expert with auctioneers Richard Winterton, said: “In the past 20 years many families have had to part with medals because of financial hardship or to pay tax. It is sad that in an age when we are all increasingly interested in our family histories people should have to sell war medals. Any move the Government makes which helps people keep them within their family is welcome.”
How the inheritance tax exemption on war medals works …
The exemption, now extended to apply to all war medals and other awards, as described above, applies only if the medal is never sold. In other words, provided a medal is given with no cash changing hands, it will remain outside the owner’s estate for inheritance tax purposes. It doesn’t matter who the owner is. Julia Rosenbloom, a director at accountancy firm Smith & Williamson, explained: “It will still be the case that the exemption will not apply if the medals have been purchased. So, for instance, medals bought at an auction would not be exempt from IHT.”
Read more:
http://www.telegraph.co.uk/finance/personalfinance/tax/11291328/Inheritance-tax-how-soldiers-families-fought-to-change-the-rules-and-won.htmlAbout bloody time.
