Inheritance Tax treatment of Kindertransport Fund payments
Published 11 July 2019
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Who is likely to be affected
Original survivors of the Kindertransport program who will receive or have received compensation payments under the Kindertransport Fund.
General description of the measure
This measure will legislate relief from Inheritance Tax in respect of compensation payments received under the Kindertransport Fund.
Policy objective
This measure provides that a Kindertransport survivor’s estate will not be subject to Inheritance Tax in relation to payments received from the Kindertransport Fund, whether the payment is made to the claimant before their death or later to their spouse or children.
Background to the measure
In late 2018, the German government agreed to provide compensation payments for child survivors of the Kindertransport. The Kindertransport was an organised rescue effort of Jewish children. The children were transported from Germany to escape persecution from the National Socialist regime and were not accompanied by parents.
There has been no consultation on the measure. The Kindertransport Fund will make one off payments of 2,500 euros to survivors who meet certain specified criteria.
Detailed proposal
Operative date
The measure will be backdated to take effect in relation to deaths on and after 1 January 2019 when the scheme opened, and will apply to all payments from the Kindertransport Fund whenever made.
Current law
Current law is included in Section 4 of the Inheritance Tax Act 1984 which imposes the charge to Inheritance Tax for transfers on death. Compensation payments, or the right to receive such compensation, would be treated as part of the deceased’s estate and may be subject to Inheritance Tax at death.
Section 153ZA of the Inheritance Tax Act 1984 provides that certain qualifying payments to victims of persecution during Second World Era are not subject to Inheritance Tax.
Proposed revisions
Legislation will be introduced in Finance Bill 2019-20 to add one off payments of 2,500 euros from the Kindertransport Fund to the list of qualifying payments in Part 1 of Schedule 5A of the Inheritance Tax Act 1984. The effect of this will be that the tax on the amount of the compensation payment made by the Kindertransport Fund should be allowed as a credit against the tax arising on the chargeable value of the recipient’s estate.
The legislation will also extend the provisions in Section 153ZA(8) of the Inheritance Tax Act 1984 to allow Treasury to make retrospective regulations in relation to future schemes.
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 |
|---|---|---|---|---|---|
| Negligible | Negligible | Negligible | Negligible | Negligible | Negligible |
This measure is expected to have a negligible Exchequer impact.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure will impact individuals who receive payments under the Kindertransport Fund and ensures that payments from the Kindertransport Fund are not subject to Inheritance Tax in the estate of the claimant whether the payment is made to the claimant before their death or later to their spouse or child. The measure is not expected to have an impact on family formation, stability or breakdown.
Equalities impacts
This measure will impact individuals who are of Jewish faith or ethnicity and were part of the Kindertransport program. As the Kindertransport program took place during World War 2 most individuals receiving payments will be older but will not differentiate based on gender.
Impact on business including civil society organisations
This measure is expected to have no impact on businesses as it only affects individuals in receipt of payments under the Kindertransport Fund.
Relevant charitable organisations will already be familiar with the existing relief for victims of persecution during Second World War Era and therefore will not need to familiarise themselves with the new legislation.
Operational impact (£m) (HMRC or other)
There will be no significant operational impact nor additional costs for HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be kept under review through information collected on tax returns and communication with affected taxpayer groups.
Further advice
If you have any questions about this change, contact Jane Romilly Hague on telephone: 03000 547 038 or email: jane.romillyhague@hmrc.gov.uk.