Introduced around the time of the Napoleonic wars to recognize and support the families of soldiers killed on active duty, this lesser-known death duty (now inheritance tax) exemption, the ‘blue light’ relief, recently regained public attention.
The original intent was that soldiers killed during active service are exempt from paying death duties (IHT). If an estate qualifies for the ‘blue light’ relief, the normal inheritance tax provisions will not apply.
During WWII, it was made clear that this exemption was to include those who died as a result of an injury or disease caught during active service as well as those who specifically died in battle. Also eligible are those involved in more recent conflicts such as Northern Ireland, the Falklands and Gulf wars, and on deployment in Iraq and Afghanistan
In 2015 the exemption was extended to include emergency service personnel who die from an injury, accident or disease they contract whilst responding to an emergency through the course of their job.
The government recently confirmed that the definition of an ’emergency worker’ in the current pandemic would include doctors, nurses, and paramedics. There does not appear to be any obligation that the work is paid employment, nor that the employment is permanent. However, it has not yet been clarified if this exemption will apply to care or social workers, or individuals who provide administrative and management support to defined emergency works but not actively involved in providing medical services.
There is a high degree of public interest in this area and the expectation is for government policy to change (and/or test cases take place). There are also questions over the life-long issues Covid-19 may cause such as respiratory damage, or the need for dialysis. The exemption may apply in these cases – but that is an issue that will only be become clear over time.
Sanlam Adviser update 10 June 2020