LPC NOTES
[PROBLEM ANALYSIS RESEARCH TASK]
(2019-2020)
, PROBLEM ANALYSIS RESEARCH TASK
CLIENT Brian Forbes
MATTER Exemptions for inheritance tax
DATE 8 December 2012
PROBLEM ANALYSIS
The Client, in the capacity of an executor, wishes to know the potential tax liability for his
father, Gerald Forbes. Gerald’s estate is valued at £2,800,000 with £800,000 of that amount
as a lifetime gift made by Gerald with reservation of benefit.
ISSUES
Gerald’s cause of death was partially due to an injury acquired during Gerald’s service in the
Battle of Britain in 1940. Therefore, I have identified the following issues:
1. what inheritance tax exemptions exist for deaths caused by active service and if this
must be the whole cause or contributory cause as in Gerald’s case;
2. how an estate would qualify for such exemptions and if Gerald’s estate qualifies due
to the death occurring many years after service; and
3. what the exemptions cover and if it covers the life time gift made by Gerald subject to
reservation of benefit.
, REPORT 1
ISSUE
What inheritance tax exemptions exist to relieve tax liability when deaths are caused by
active service. Must this be the whole cause or contributory cause as in Gerald’s case.
CONCLUSION
The Inheritance Tax Act 1984 states that inheritance tax charges are exempt when the
individual’s cause of death was due to active service.
Case law has established that a wound (or disease) did not have to be the only cause of death
so long as it contributed to the death.
Therefore, if Brian can prove that Gerald’s chest wound was acquired during his active
service in the Battle of Britain and that this contributed to Gerald’s death, Brian may claim
the exemption for inheritance tax subject to further qualifications discussed below.
REPORT
Primary source
Inheritance Tax Act 1984 sets out the rules governing inheritance tax as to how this tax
should be applied and the exemptions and reliefs that can be relied on.
s4 of the Inheritance Tax Act 1984 states that on the death of any person, tax will be charged
as if, immediately before his death, ‘he had made a transfer of value and the value transferred
by it had been equal to the value of his estate immediately before his death’.
s154 of the Inheritance Act 1984 states that section 4 shall not apply in relation to the death
of a person if that person died due active service subject to this being certified by the Defence
Council or the Secretary of State.
In Barty-King v Ministry of Defence [1979] the executors claimed exemption from estate
duty on the basis that he had "died from a wound inflicted" on active service. The case
established a wound (or disease) did not have to be the only cause of death so long as it
contributed to the death.
HMRC Inheritance Tax Manual IHTM11282 Killed in War Exemption states that the
exemption works by providing that s4 of the Inheritance Tax Act 1984 shall not apply on the
death of the person concerned. It further states that the exemption relates to inheritance tax
which would otherwise be chargeable on the death under s4 of the Inheritance Tax Act 1984,
and all tax that would be chargeable on the death, under any title, and no matter who it is
passing to.
Commencement
The sections of the Inheritance Act 1984, mentioned above, came into force 1 January 1985 –
see s274, Sch 7 of the Inheritance Act 1984.
S4 of the Inheritance Tax Act 1984 was derived from the Finance Act 1975 – see s22 (1) and
(9).
[PROBLEM ANALYSIS RESEARCH TASK]
(2019-2020)
, PROBLEM ANALYSIS RESEARCH TASK
CLIENT Brian Forbes
MATTER Exemptions for inheritance tax
DATE 8 December 2012
PROBLEM ANALYSIS
The Client, in the capacity of an executor, wishes to know the potential tax liability for his
father, Gerald Forbes. Gerald’s estate is valued at £2,800,000 with £800,000 of that amount
as a lifetime gift made by Gerald with reservation of benefit.
ISSUES
Gerald’s cause of death was partially due to an injury acquired during Gerald’s service in the
Battle of Britain in 1940. Therefore, I have identified the following issues:
1. what inheritance tax exemptions exist for deaths caused by active service and if this
must be the whole cause or contributory cause as in Gerald’s case;
2. how an estate would qualify for such exemptions and if Gerald’s estate qualifies due
to the death occurring many years after service; and
3. what the exemptions cover and if it covers the life time gift made by Gerald subject to
reservation of benefit.
, REPORT 1
ISSUE
What inheritance tax exemptions exist to relieve tax liability when deaths are caused by
active service. Must this be the whole cause or contributory cause as in Gerald’s case.
CONCLUSION
The Inheritance Tax Act 1984 states that inheritance tax charges are exempt when the
individual’s cause of death was due to active service.
Case law has established that a wound (or disease) did not have to be the only cause of death
so long as it contributed to the death.
Therefore, if Brian can prove that Gerald’s chest wound was acquired during his active
service in the Battle of Britain and that this contributed to Gerald’s death, Brian may claim
the exemption for inheritance tax subject to further qualifications discussed below.
REPORT
Primary source
Inheritance Tax Act 1984 sets out the rules governing inheritance tax as to how this tax
should be applied and the exemptions and reliefs that can be relied on.
s4 of the Inheritance Tax Act 1984 states that on the death of any person, tax will be charged
as if, immediately before his death, ‘he had made a transfer of value and the value transferred
by it had been equal to the value of his estate immediately before his death’.
s154 of the Inheritance Act 1984 states that section 4 shall not apply in relation to the death
of a person if that person died due active service subject to this being certified by the Defence
Council or the Secretary of State.
In Barty-King v Ministry of Defence [1979] the executors claimed exemption from estate
duty on the basis that he had "died from a wound inflicted" on active service. The case
established a wound (or disease) did not have to be the only cause of death so long as it
contributed to the death.
HMRC Inheritance Tax Manual IHTM11282 Killed in War Exemption states that the
exemption works by providing that s4 of the Inheritance Tax Act 1984 shall not apply on the
death of the person concerned. It further states that the exemption relates to inheritance tax
which would otherwise be chargeable on the death under s4 of the Inheritance Tax Act 1984,
and all tax that would be chargeable on the death, under any title, and no matter who it is
passing to.
Commencement
The sections of the Inheritance Act 1984, mentioned above, came into force 1 January 1985 –
see s274, Sch 7 of the Inheritance Act 1984.
S4 of the Inheritance Tax Act 1984 was derived from the Finance Act 1975 – see s22 (1) and
(9).
