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Death In Service Inheritance Tax

Volume 543: debated on Tuesday 17 April 2012

It is a pleasure to serve under your chairmanship, Mr Hood.

The debate relates to death in service inheritance tax and the case of Nigel Lawrence Thomas. The debate goes to the heart of how we treat our servicemen and women who risk their lives on our behalf and who, like Nigel Thomas, pay the ultimate price.

Thank you, Mr Hood.

I have secured the debate to highlight an unfairness in the existing legislation that prevents some members of the armed forces who die in service from being exempt from inheritance tax, despite receiving conditions while on active service from which they later die.

Before I go into the facts of the case, I want to pay tribute to the family of Nigel Lawrence Thomas. His parents are my constituents, and they are still grieving over the loss of their son. They have asked me to ask the Minister to look again at the law on death in service inheritance tax. I am happy to do so, and I hope the Minister will also be happy to do so. I have been particularly humbled by the way in which Mr and Mrs Davies, who are the parents of Mr Thomas, have gone about raising this issue. They accept that it may be too late to see their situation revised, but they want to ensure that such circumstances do not occur in the future for other grieving families.

The facts are simply these. Nigel Lawrence Thomas served in the Royal Air Force from 1980 to 2004. At the time of the first Gulf war, between 1989 and 1992, he was stationed in Cyprus. For this service, he received the Gulf medal. I remind the Chamber that the Gulf medal was awarded to recognise

“service in the Gulf with special regard to the hardships and dangers which have accompanied duty there.”

While on active service in Cyprus, Nigel was exposed to radiation, following an accident. In March 1992, he was diagnosed with chronic myeloid leukaemia. Following the accident, he suffered from that illness for 18 years. Mr Thomas died on 28 March 2010.

A letter given to me by his family from the Service Personnel and Veterans Agency, dated 12 November 2010 and signed by Mrs E. Milligan, states clearly that, according to his death certificate, he died from

“intracranial bleed, which was secondary to thrombocytopenia; which in turn was secondary to the chronic myeloid leukaemia.”

The letter goes on to state that the chronic myeloid leukaemia is

“accepted as attributable to service”.

According to the letter that the family received from the SPVA, therefore, his death was

“due to or hastened by service”.

As a result, the SPVA agreed to meet the funeral expenses following Nigel’s death in March 2010.

Mr Thomas’s family have also provided me with a letter dated 16 July 2010 from Richard Clark, professor of haematology and consultant haematologist at the Royal Liverpool and Broadgreen university hospitals. These letters have previously been supplied to the Minister and the Ministry of Defence. Professor Clark confirms:

“there is clear and incontrovertible evidence that radiation can cause chronic myeloid leukaemia.”

He also goes on to confirm that the chronic myeloid leukaemia was

“undoubtedly what caused his untimely death”.

Those are the facts. Mr Thomas was a long-serving RAF pilot. He was stationed in Cyprus during the first Gulf war. He was supporting our war effort when he was exposed to radiation as the result of an accident. That exposure to radiation led to his untimely death two years ago, after suffering from cancer for 18 years.

Nigel Thomas’s funeral expenses were granted by the Ministry of Defence and the SPVA. On the basis that his death, as described in the letter, was due to service, the family applied for exemption from inheritance tax under section 154 of the Inheritance Tax Act 1984. The section disapplies the relevant inheritance tax provisions for death on active service of those who have

“died from a wound inflicted, accident occurring or disease contracted at a time when the conditions specified…were satisfied.”

Those conditions, specified in subsection 2, are that the disease was contracted

“(a) on active service against an enemy, or b) on other service of a warlike nature or which in the opinion of the Treasury involved the same risks as service of a warlike nature.”

My constituents looked at those provisions and felt that they should apply for the exemption, given that the death of Mr Thomas was, according the letter from the Ministry itself, due to service.

In a letter dated 13 August 2010 from the SPVA, which had granted funeral expenses, the claim for inheritance tax exemption was turned down. It said:

“we do not consider he was operating in a hostile or warlike environment and irrespective of whether your son’s illness can be linked to his military service, his service does not meet one of the key qualifying criteria for an exemption under section 154 of the Inheritance Tax Act as it is apparent that his condition was not sustained by service of a warlike nature.”

As a result of that decision, the family were liable for an inheritance tax bill of £33,011 on Mr Thomas’s estate. Incidentally, that figure includes £9.22 interest payable for late payment—the state certainly knows how to treat those who died in its service. The sticking point appears to be that the SPVA has determined that

“his condition was not sustained by service of a warlike nature.”

In a letter dated 7 February 2011, the Minister—who was elected on the same day as I was 20 years ago last week—reiterated the position set out by the SPVA:

“his service must be of a warlike nature and regrettably this key qualifying criteria for exemption has not been met.”

I wish to challenge that position today.

First, on the claim that the leukaemia from which my constituents’ son died was not sustained by service of a warlike nature, I remind the Chamber of the facts. My constituent served in the RAF for 24 years. At the time of his exposure to radiation, he was supporting operations in the first Gulf war. I argue that that was active service as set out in the 1984 Act. The Gulf war campaign in which my constituents’ son served was issued a campaign medal by the Committee on the Grant of Honours, Decorations and Medals to recognise

“service in the Gulf with special regard to the hardships and dangers which have accompanied duty there.”

My constituent qualified for the Gulf medal for his service, yet he did not qualify for an inheritance tax exemption. He was exposed to radiation in an accident that occurred at that time. There were considerable dangers. In serving his country, Mr Thomas contracted the leukaemia that, as has been agreed, killed him. Medical evidence from those who treated Mr Thomas also says that it killed him. He was exposed to radiation only because he was stationed in Cyprus, serving his country during a war, which leads me to a second point.

If we accept that the circumstances in which Mr Thomas was exposed to radiation could not be constituted as being of a “warlike nature”, or indeed “active service”, surely the legislation needs to be looked at again and amended. It is now 28 years old, and it is right that we review it, so that it is fair to those who die as a result of their service. If the legislation is so tightly defined as to exclude Mr Thomas from the inheritance tax provisions, I truly believe it is not fair to the families of those brave service people who give their lives in the service of their country. I am discussing the matter with the Royal British Legion, which will take an active interest in the debate today and will look carefully at the Minister’s response to what I have said in support of my constituents.

There were considerable dangers for Mr Thomas while supporting operations in Cyprus during the Gulf war, which were recognised through the Gulf medal. It cannot be fair that, although he performed an integral supporting role in the operations, he is not entitled to the exemption, as those who fall on the other side of section 154 of the 1984 Act are. It is beyond doubt that Mr Thomas died of a condition contracted while serving his country during the Gulf war.

I ask the Minister to look again at the legislation, so that other families do not fall foul of its provisions. We should do all that we can to support families who have lost a loved one as a result of active service protecting our shores. I have several questions for him that I hope he will reflect on to look at the matters in detail again, if not in today’s debate, then afterwards. It is important that I ask him again to review the claim made by Nigel’s family, following his death in March 2010. I appreciate that he has reviewed it, as he said to me in a letter at the time, but I ask him to do it once more. He has a duty to look at it once again, because Nigel Thomas died of leukaemia contracted through radiation in service.

Mr Thomas’s death was a tragedy for the family that raises wider issues, so, more importantly for the public and the wider armed forces, will the Minister commit today to reviewing the operation of section 154 of the 1984 Act? I want him to focus particularly on the use of the word “active”, as it remains my view that service can cause death, and if it is proved to have caused death, that should be sufficient for the exemption to apply. At the moment, the focus is on “active service”, and we could debate all day whether service in Cyprus in support of operations in the Gulf was active service. It could be interpreted as active service. If the wording was simply “service” rather than “active service”, I believe that Mr Thomas’s family would have been exempt from inheritance tax and that could have saved them a bill of £33,000 at a time when they were coming to terms with the death of their son.

I humbly suggest that the review focus on the current appropriateness of section 154. There have been a number of conflicts since 1984, and they have become ever more complex, with a range of issues to examine. The legislation is 28 years old and is worthy of review by the Minister. Will he assess the anticipated demand from revising the section? He can look at how many claims like that of Nigel Thomas’s family have been made and how many the SPVA has turned down. I am not aware of that many. I do not believe that there will be a massive flow of cases giving the Government a liability of millions of pounds, but I would welcome a review to examine whether such cases have been brought and how many. I would also welcome the Minister consulting the Royal British Legion and other parties on the provisions of the 1984 Act. Will he report to the House, either by letter or written statement, on the outcome of the review, so that he can at least tell me and those who are interested in the case, but more importantly Nigel Thomas’s family, that he has gone the extra mile to look at whether they were treated fairly in the period following Nigel’s death?

The loss to Nigel’s family is immense and a grievous blow, but they hope, and have asked me to ensure, that raising Nigel’s death in this way, having raised it with the Minister in correspondence, will lead to a change, so that families in future do not have to face the same injustice that Nigel’s family have had to endure. Nigel Thomas gave his life in service to his country. Had he died by bullet, his estate would not have paid inheritance tax; but because he died from cancer caused by radiation, his estate has not been exempted. It is a grave injustice that I hope the Minister will redress today.

It is a pleasure to speak under your chairmanship for, I think, the first time, Mr Hood. The topic is important and sensitive, and I am grateful for the opportunity to respond.

We in the Ministry of Defence strive very hard to provide appropriate support to bereaved families when one of our serving or former service personnel loses their life. I am always saddened to hear of cases in which families feel that they have not received the support that they should at the time of their loss. The background to the case of Mr Thomas is a tragedy and I extend my sympathy to his family, who are still most upset about his death and the issues raised. The passing of time does not always ease the pain of bereavement, particularly when it is worsened by the feeling that the support provided at the time was not sufficient. I assure the right hon. Member for Delyn (Mr Hanson) that the support provided to next of kin and other grieving relatives continues to improve.

When a service person dies in service, an appropriate representative will be appointed from the casualty’s own service as the prime point of contact for the next of kin, and in some instances the emergency contact, if considered appropriate. That person will be a dedicated officer known as the visiting officer, and they will guide and assist the next of kin in repatriation and funeral procedures—I regret to say that that is all too often with Operation Herrick—and will help with any questions the family may have. The visiting officer provides a crucial liaison between families and the services, which continues for as long as it is needed. A veterans’ welfare officer will also be appointed from within the Service Personnel and Veterans Agency to assist the dependants of the deceased. They can provide advice and guidance on the comprehensive package of benefits that may be available under the armed forces pension and armed forces compensation schemes, brought in by the previous Government, of which the right hon. Gentleman was a member, and on other more wide-ranging issues, such as housing and benefit entitlements from the Department for Work and Pensions.

Although some defence charities, such as SSAFA Forces Help or the Royal British Legion, cannot make direct or unsolicited contact with service families, they can provide long-term support to bereaved service families who approach them, including a support group consisting of bereaved relatives meeting on a regular basis to offer support to each other.

The whole Government recognise that service personnel such as Mr Thomas warrant special consideration in acknowledgment of the particular debt of gratitude owed to them for service given in the cause of national defence and international peace. We are aware of the sacrifices made by those who have risked their lives and suffered hardship in facing the challenges of military service. On 16 May 2011, the Secretary of State for Defence published the armed forces covenant—a new tri-service document and the first of its kind. It sets out what service personnel and their families can expect from the Government and the nation in recognition of what we ask them to do to keep us safe. The Government are determined to remove disadvantages encountered as a result of service and, by publishing the covenant, we have established the right direction of travel.

The case of Nigel Lawrence Thomas is a very sad one and, again, I extend my condolences to his parents and other family members. Mr Thomas proudly served his country as a member of the Royal Air Force until he was discharged in 2004. His life was then tragically cut short by chronic myeloid leukaemia and secondary conditions in March 2010. From previous endeavours on behalf of Nigel’s mother, Mrs Davies, the right hon. Gentleman will be aware that, subsequent to the sad loss of her son, she first made enquiries about an exemption from inheritance tax at the Service Personnel and Veterans Agency in June 2010.

In recognition of the particular debt of gratitude that we owe to our former service personnel, it is only right and proper that in certain circumstances special consideration be given as to whether a deceased person’s estate should be exempt from inheritance tax. The right hon. Gentleman described some such conditions. A deceased service person’s estate may be exempt from inheritance tax if, under delegated authority from the Secretary of State for Defence, my officials certify that section 154 of the Inheritance Tax Act 1984 applies. Under the Act, such certification can be given when the deceased has died from a wound inflicted, accident occurring or disease contracted at a time when they were on active service against an enemy, or on service of a warlike nature. Certification may also be given in instances in which a service person dies from a disease contracted at some previous time if the death were due to or hastened by the aggravation of a disease during a period of such service. If such certification is given, my officials will recommend to Her Majesty’s Revenue and Customs that an estate should be exempt from paying inheritance tax. There is, however, no automatic exemption from inheritance tax for veterans. Deaths in retirement resulting from natural causes, road traffic accidents, or injuries or illnesses that were not contracted during or aggravated by war or warlike service do not qualify for an exemption. Equally, if individuals have a wound or illness arising from their service that might have eventually killed them but they die from a wholly unrelated cause, if the wound or illness played no part in their demise, their estate cannot be certified as exempt from inheritance tax.

Mr Thomas served in Cyprus from 1989 until 1992, and it is recognised that for at least part of that period he was operating in a role in support of operations in the Gulf during the first Gulf war. From his service record, however, it is evident that during that time he did not undertake deployed service in Saudi Arabia, Kuwait or Iraq, or come into direct contact with Iraqi forces. As such, my officials were unable to recommend that his estate be considered for exemption from inheritance tax, as the criteria defined under section 154 of the Act had not been met. A request by the family for the payment by my Department of funeral expenses in respect of Mr Thomas was approved because, in the view of an MOD medical adviser, it could not be demonstrated beyond reasonable doubt that some aspect of his service did not cause the condition that led to his death. That is, however, a quite separate issue from the matter of whether an estate should or should not be eligible for an exemption from inheritance tax. The criteria involved are quite different, and it would be wrong to assume that the decision to pay funeral expenses undermines the decision by my officials not to recommend an exemption. Similarly, the award of the Gulf medal for the first Gulf war was made on the basis that people were supporting, full-time, the operation, and not on whether they were engaged in warlike service.

The right hon. Gentleman asked me to look again in particular at the legislation. I assure him that I will, on his behalf, because he has raised an important case. First, as requested, I will review the case and look in particular at the accident referred to in his speech. Secondly, I will review the operation of section 154 of the Inheritance Tax Act 1984, in conjunction with my colleagues in the Treasury. He particularly asked me whether I was happy to go the extra mile for the family of Nigel Thomas, whose case the right hon. Gentleman has articulated so well today. I certainly will and hope that he may be reassured by that.

If I may respond to the Minister’s comments, I thank him personally, on behalf of the family, for agreeing to review the case of Mr Thomas. I also thank him for his promised review of section 154 of the Act. In my speech, I asked whether the Minister could report back to the House. I should be grateful if he would confirm that he will either write to me or issue a written statement following that review so that we can have some clarity on the outcomes, and if he would let me know the time scale of the review.

I assure the right hon. Gentleman that I shall reply to him. Time scales, as he knows from his past as a Minister, can sometimes be what I might call slightly fluid, but I shall endeavour to be as timely as possible.