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HMRC internal manual

Inheritance Tax Manual

Compensation for wrongs suffered during World War II: ex-gratia payment to Britons held as prisoners of war by the Japanese

On 7 November 2000, the Government announced that on a claim made to the War Pensions Agency, it was to make an ex-gratia payment of £10,000 to all surviving members of British Groups held prisoner by the Japanese during the Second World War. Where a member did not survive to 7 November, the surviving spouse will be entitled to claim. If the member survived to 7 November, but died before making a claim, either the estate or the surviving spouse may make the claim. It is known as the Far Eastern Prisoners of War Ex-Gratia Scheme.

Claimants are entitled to a single sum of £10,000 unless exceptionally they qualify for more than one payment by being both an ex-prisoner of war themselves and the surviving spouse of a deceased ex-prisoner of war.

Normally the payment, or the value of the right to make the claim, would form part of the deceased’s chargeable estate. 

Under IHTA84/S153ZA (replacing Extra Statutory Concession (ESC) F20) where the payment has been made, or the personal representatives include a value for the right to make a claim, the payment/value for the right is effectively left out account for Inheritance Tax purposes.

The ESC applied to all deaths after 7 November 2000, whether or not the money can actually be traced in the deceased’s assets and irrespective of when the money is received. S153ZA replaced the ESC for deaths on or after 1 January 2015.

If the payment is made, the estate is entitled to the deduction.

The instruction at IHTM04423  tells you how to apply the relief.