Inheritance tax and Covid-19 – no further clarification from government on emergency workers

The Inheritance Tax Act 1984 contains provisions that mean that emergency service personnel’s estates are exempt from inheritance tax in the event that an emergency responder dies as a result of responding to emergency circumstances. The relief was announced in the 2014 budget and implemented as a result of the Finance Act 2015 and as with all reliefs, there are a number of conditions to be satisfied, namely:

• The person concerned must fall within the definition of an ‘emergency responder’ as defined in the legislation; and
• The death of the person concerned must arise from:
  • Either an injury, accident or disease which arose from that person responding to emergency circumstances; or
  • A disease contracted at some previous time but the person’s death resulted from the disease being aggravated as a result of that person responding to emergency circumstances.

There have been a number of articles in the mainstream press recently appearing to confirm that the relief will apply to those NHS frontline workers who pass away as a result of contracting the Coronavirus. However, what is not clear is whether or not this will apply to those workers irrespective of where they contracted the disease.

Whilst there have been many calls on the Government to formally confirm this (and extend the legislation if necessary), at the time of writing, no formal confirmation has been given and the legislation has not been amended.

However, there is a very strong argument that the relief does apply to those workers who do contract the virus as a result of their frontline role in any event.

The definition of ‘Emergency Responders’ in the legislation includes:

• “a person employed for the purposes of providing, or engaged to provide, medical, ambulance or paramedic services”.

I think it is fair to say that NHS frontline staff fall into this category on the basis that they are employed by the NHS to provide medical services.

I think it is also fair to say that if a person did sadly pass away as a result of contracting the virus, this would satisfy the criteria of the death arising from a disease; the question is whether HMRC would accept that the person was “responding to emergency circumstances”.

The legislation rather helpfully defines each of the elements of this criteria.

“Emergency circumstances” are defined as circumstances that are present or imminent and are causing or likely to cause the death of, serious injury to or the serious illness of a person.

“Responding to” those circumstances is defined to include “dealing with” emergency circumstances.

It is without a doubt that there is a very strong argument to be made that those sad deaths of our NHS front line workers who contract the virus in the course of their role tick all of the above boxes. HMRC’s inheritance tax manual states “The range of emergency services covered by the provisions is wide”; a clear acknowledgement that the relief will not just cover a paramedic responding to a call or a police officer killed whilst dealing with an incident.

We also cannot forget that the World Health Organisation declared the outbreak of the virus a “Public Health Emergency of International Concern” on 30^th January 2020.

However, the point that remains unclear at present is whether the relief will be allowed for those NHS workers  where it cannot be proved that they contracted the virus as a result of their role. If the virus was contracted elsewhere, it would then be necessary to prove that  their role aggravated the illness which ultimately resulted in death.

Bruce Clarke is a Partner in Rix & Kay’s Private Client Team and an expert in inheritance tax. If you would like more information on how to create, grow, protect, realise and pass on your business and personal wealth then you can email Bruce at e. bruceclarke@rixandkay.co.uk