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HMRC internal manual

Inheritance Tax Manual

Compensation payments: payments under the continuing NHS health care scheme

Where continuing NHS care is provided outside of a hospital - usually in a residential care home - the patient is entitled to have the costs of that care reimbursed by the NHS. This facility has not been taken up by many of the people who were entitled to it. Following two reports by the Health Service Ombudsman the patients, or their relatives, are now making claims for compensation from the NHS and, where the patient died, payments are being made to estates.

The continuing NHS care scheme started in 1995, so after that time anyone who qualified was entitled to make a claim to have the costs of their care funded by NHS. That right to make a claim is an asset of their estate at death and is subject to tax and interest in the normal way. But the sum received by the estate should be discounted to reflect the delay that would have been incurred in making the claim and the uncertainty about whether the person would have qualified or the extent to which they would have qualified. The discounts allowed are as follows

Date of death Discount
Before 17/07/99 100%
17/07/99 - 13/02/03 75%
14/02/03 - 16/12/04 40%
On or after 17/12/04 10% (but see below)

Where the death is on or after 17 December 2004, you should establish the extent to which the claim had progressed at the date of death. If no claim had been made, you should allow the full 10% deduction. But, at the other extreme, if the claim had been agreed and the estate was simply waiting for the cheque, no discount should be allowed. If the claim was in progress - and the amount is worthwhile - you should seek to negotiate a discount between 0% and 10%.