Scrap ‘unfair' inheritance tax on infected blood scandal victims, Labour urged
Two professional bodies representing lawyers and advisers have been in discussion with HM Revenue and Customs (HMRC) about fixing an issue that results in families of the infected 'unfairly' paying inheritance tax on compensation payments.
About 30,000 people contracted HIV and hepatitis C in the 1970s, 1980s and 1990s after being given contaminated blood products.
The Government set aside £11.8bn for the victims last year, and promised the compensation payments would be free from inheritance tax.
But in practice, only the first payment to the victim or the victim's estate escapes the 40pc charge. So-called 'second' transfers do not.
This means that if a victim died years ago and their estate now received compensation, that sum would be subject to inheritance tax when the person inheriting their estate also passed away.
The Government has taken so long to compensate the victims that many of those affected are now in their later years.
As a result, some could pass away soon after receiving compensation. This could then lead to their families paying back 40pc of the sum to the Government.
The Association of Lifetime Lawyers and the Society of Trust and Estate Practitioners (STEP) have sent a report to HMRC and a letter to the chair of the inquiry pushing for a solution through the introduction of secondary legislation.
Jade Gani, of STEP, said: 'We will continue to work with HMRC, the inquiry team and other partners to ensure the law changes as swiftly as possible, and are encouraged by the progress so far.
'We hope that the Government will act swiftly to ensure that bereaved families aren't unfairly penalised at such a difficult time.'
In a damning report published this week, the inquiry chair, Sir Brian Langstaff, warned that victims had been 'harmed further' by injustices in the compensation scheme.
The latest figures from the Infected Blood Compensation Authority show that so far only 460 people have received compensation payments, worth hundreds of thousands, and sometimes millions, of pounds.
The inquiry has not referenced the inheritance tax issue in its reports so far.
However, 'many infected and affected parties' could be impacted, according to the lawyers.
The Telegraph previously highlighted the problem in April. One woman in her late 60s said she was entitled to £1m in compensation through the estate of her brother who died in the 1990s after being infected with HIV.
But under the current rules rules, her family would be hit with a £400,000 bill if she died following the payout. She said it was 'completely morally wrong' that inheritance tax should be applied to her brother's compensation.
In the letter sent to Sir Brian on July 10, Ms Gani wrote: 'Compensation for infected blood scandal victims should never be taxed, whether in life or death.'
She continued: 'Given that one of the most damaging aspects of the infected blood scandal has been how exceptionally long it has taken for government bodies to acknowledge the harm caused and provide redress, and we continue to see delays with compensation payments being issued, we believe it to be highly unconscionable that those infected and affected should be negatively impacted by tax technicalities only created by such a long delay in making these payments.'
Sir Brian has called for an overhaul of the compensation scheme. He made several recommendations in his report including that victims should be allowed to apply for compensation rather than having to wait for an invitation, and that older or seriously ill victims and family members should get priority.
A government spokesman said: 'The victims of this scandal have suffered unspeakable wrongs. We have designed a comprehensive compensation scheme and so far, have paid over £300m to victims.
'Infected and affected victims are not taxed on their compensation. But, like many other compensation schemes, intestacy laws apply.'
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