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HMRC internal manual

Inheritance Tax Manual

Compensation for wrongs suffered during World War II: how to apply the relief

The terms of ESC F20 are that the payment is to be left out of account in determining the value of the chargeable estate. This means the estate as a whole, not just the Free Estate, so the benefit of the deduction must be spread across all the different components of the estate, that is FE, settled estate, (IHTM16000) GWRs (IHTM14301) etc. It also means that the benefit of the reduction will be given to estates where the Free Estate is, say, spouse exempt, (IHTM11031) but other aggregable property exceeds the threshold

To achieve this, you must reduce the amount of tax that is chargeable rather than give a deduction against capital. To do this within the current assessing framework, you should include a figure which is the lesser of

  • 40% of the payment(s) received, or
  • the actual tax due before allowing the reduction in the QSR (

IHTM22041) box on COMPASS (IHTM31101) – and include a suitable note on the assessment(s). The subsequent calculations will automatically apportion the benefit of the reduction across the estate as a whole. In the rare event that QSR is also due simply add the figures together.

Claimants have been asked to preserve their award letter as evidence of entitlement and there is a good chance that a copy of that letter will be attached to most Accounts. Where the letter is not attached and the tax is reduced then

  • if there is no other reason to write to the personal representatives, you should not write just to obtain a copy of the letter, but
  • if you are taking up an enquiry, you should ask the personal representatives to send a copy.