Daughter of pilot enters into row with MoD regarding IHT

Categories IHT, Industry News, Inheritance Tax

This is a particularly interesting story that we came across on The Guardian recently, as it involves inheritance tax (IHT) rules for those in service and the different implications of how they died. In this particular case, the death of Lieutenant James Patrick occurred around 50 years ago, when a jet he was flying exploded mid-air; however, the Ministry of Defence (MoD) has made a recent ruling that has stunned his daughter with a large IHT bill.

Under current rulings, the estates of members of the armed forces are made exempt from IHT if certain conditions are met regarding their death. The dispute arises over whether Lieutenant Patrick was killed during "warlike" service or during a routine training exercise.

Lieutenant Patrick died during the 1966 Beira Patrol in Mozambique. The plane Lieutenant Patrick was in took off to practise dropping bombs on sea targets, however a bomb exploded prematurely killing Lieutenant Patrick and his observer. The IHT debate began in 2013 when the wife of Lieutenant Patrick died, thus leaving their daughter – Serena – questioning if the estate left over was subject to exemption.

Serena applied to the Service Personnel and Veterans Agency (SPVA) for IHT exemption but was rejected. The Beira Patrol was classified as a blockade, and not war, thus making IHT exemption not applicable.

The estate of Lieutenant Patrick and his wife is worth £965,000 – far above the £325,000 IHT threshold. This has equated to an IHT bill of £265,000 which has left Serena heavily in debt. She noted that if the exemption had been granted, the bill would have been reduced to £126,000. She concluded that: "this really feels like a lack of recognition for his utter commitment to the defence of this country, and his bravery."

Do you think it's fair that because Lieutenant Patrick died on a training accident that IHT exemption should not be granted?