1. IHT: exemption for emergency service personnel and humanitarian aid workers
The existing inheritance tax (IHT) exemption for members of the armed forces who die or whose death is caused or hastened by injury while on active service will be extended to emergency service personnel and humanitarian aid workers responding to emergencies. The extension will have effect for deaths on or after 19 March 2014.
2. IHT: exemption for medals and other awards
The existing inheritance tax (IHT) exemption for medals and other decorations for valour or gallantry will be extended to all medals and decorations awarded to the armed services or emergency service personnel, and awards made by the Crown for achievements and service in public life. The measure will have effect from 3 December 2014.
3. Trusts – settlement nil rate band shelved
The government has dropped plans to introduce a single settlement nil rate band to be shared between all trusts set up by a settlor in lifetime or on death. The government included the original proposal in its plans to change the inheritance tax rules for relevant property trusts in a consultation published on 6 June 2014. It will still introduce measures to prevent the use of multiple trusts to avoid inheritance tax and to simplify the inheritance tax rules for relevant property trusts in Finance Bill 2015.
The settlement nil rate band proposal was heavily criticised as an overly complex, and unfairly retrospective solution to inheritance tax avoidance. However, it is something of a surprise that it has been shelved. Professional bodies have pointed out that widening the related settlements rules in section 62 of the Inheritance Tax Act 1984 would deter taxpayers from using multiple trusts. This may be the form that the new measure takes.