IHTM10262 - Compensation payments: compensation for Holocaust victims

FA2006/S64 provides an exemption from IHT for compensation paid by both UK and foreign banks to Holocaust victims or their heirs which has arisen on dormant accounts belonging to those victims from the war-time era. The exemption was initially provided by extra statutory concession (ESC A100) and covered compensation paid in respect of UK bank accounts under the Restore UK scheme only. However, FA 2006 has extended the exemption to cover not only payments made under the Restore UK initiative but also any ’qualifying deposit’ under any ’qualifying compensation scheme’, for example the Claims Resolution Tribunal arrangements for dormant accounts in Switzerland.

The terms ’qualifying compensation scheme’ and ’qualifying deposit’ have the same meaning as in section 756A of Income Tax (Trading and Other Income) Act (ITTOIA) 2005 (web) that is:

A scheme will be a qualifying compensation scheme if it is legally constituted by an instrument in writing

its purpose (or one of its purposes) is to make payments of interest to or in respect of victims of National Socialist persecution for qualifying purposes in respect of qualifying deposits

A deposit will be a qualifying deposit if it was made

  • by, or on behalf of the victim
  • on or before 5 June 1945

FA2006/S64(5) says that if, before a claim could have been made under any qualifying compensation scheme,

a person beneficially entitled to a qualifying deposit had died and

no information about the deposit had previously been disclosed in connection with that deceased person,

that compensation claim is to be ignored for all purposes of the IHTA 1984 in connection with that death.

So, the exemption only applies to any potential claimant who died before the respective award scheme was opened for claims. Once a scheme is open for claims normal Inheritance Tax rules will apply. If this is the case the proceeds of a successful claim, the value of a claim, or of the right to make a claim where an award has not yet been made, will form part of the deceased claimant’s estate in the normal way.

The Restore UK scheme was opened for claims in May 2000. The opening date for the Claims Resolution Tribunal (CRT) award scheme is the date on which the account holder’s name was published. The CRT has published two lists of account holders, one on 5 February 2000 and a second on 13 January 2005. You should note that all deadlines to file claims related to the names and/or accounts appearing on these lists with the CRT have passed.

If you receive any claims for exemption under FA 2006/S64, you should obtain all the information you need about the scheme and payment to decide whether it is a qualifying scheme and qualifying deposit as defined above, and whether the exemption can be allowed.

There are separate instructions at IHTM04422 on how to deal with payments made under various schemes to compensate victims for suffering caused by the German National Socialist (Nazi) regime during the Second World War. Detail of the schemes covered by the relief provided by IHTA84/S153ZA can be found there.