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Correspondence from readers on inheritance tax relief for emergency responders and penalty charges.
Inheritance tax and emergency responders
The article by Owen Byrne, ‘On the frontline’ (see Taxation, 18 June 2020, page 8) suggested that the estates of key workers who die from coronavirus should benefit from the inheritance tax exemption in IHTA 1984, s 153A for emergency service personnel. Mike Warburton had also raised this issue and the following statement was received from HMRC, following a journalist’s request for clarification.
‘The current Covid-19 emergency would mean doctors, nurses, paramedics, ambulance drivers, and others providing medical services in response to the Covid-19 emergency would qualify as responding to emergency circumstances as an emergency responder.
‘Within social care, employees of publicly funded care homes and home care or those employed by a charity providing services in response to the Covid-19 emergency, would also qualify. The existing statute allows for those engaged by government or a charity to provide humanitarian assistance in response to an emergency circumstance to also be exempted from any inheritance charge, alongside emergency services responders.’
On closer inspection, it appears that HMRC considers that the categories above already fall within IHTA 1984, s 153A(6)(c) and (6)(f) and the department has confirmed this. A decision by the Treasury would be required if the definition of ‘emergency responder’ under IHTA 1984, s 153A(8) were to be extended to encompass any other key workers such as non-medical hospital staff or those in private care homes.
We are not aware of any mention of this in the department’s Inheritance Tax Manual or the Trusts and Estates Newsletter.
Taxation magazine.
Draconian penalties
I have just read again ‘The butterfly effect’, Mike Thexton’s brilliant expose of the Medivet Group Ltd penalty case (see Taxation, 30 April 2020, page 16). While we now see HMRC in the role of ‘Father Christmas’ to employers and self-employed businesses, I would just warn everyone that the comment by Mr Sunak that the self-employed would have to pay for their help by higher National Insurance contributions (no such threats against those in receipt of furlough payments) was followed by warnings that HMRC would be more aggressive post-Covid 19 against businesses.
In the meantime, how was HMRC allowed to extract the most draconian penalties on VAT mistakes as well as the already unfair penalties for income tax where there is no or little tax liability?
As a flavour of what could happen, look also at the case of M Roberts (TC7616). Who could believe that HMRC would actually impose a penalty of £2.99 (reduced by the tribunal to £2.60) on a tax debt of £13 (Taxation, 30 April 2020, page 7)?
This brings me back to something that I have raised previously in the pages of Taxation – ‘the reverse tax gap’. We hear estimates from HMRC of the tax gap with no real facts to back it up. However, no information is ever given of the penalties charged when no tax is lost or in the unbelievable situations such as the Medivet Group Ltd case when the penalties are out of all proportion to the error in question.
Robin Summers FCA, Summers & Co, chartered accountants.
