Families face inheritance tax on compensation

STEP, the professional body for trust and estate practitioners, alongside the Association of Lifetime Lawyers, have delivered an open letter to the Chancellor of the Exchequer, Rachel Reeves MP, appealing for immediate legislative changes to address the unfair inheritance tax (IHT) burdens facing bereaved families affected by the infected blood scandal. The current system could unjustly deprive these families of up to 40% of their compensation payments, especially for those who have died awaiting redress. Despite prior assurances from the government that these compensation payments would be exempt from IHT, the reality remains stark for many.

Jade Gani TEP, a leading member of the Association of Lifetime Lawyers, remarked that "Victims and their families have already endured decades of pain and delay, it is an outrage that a technical flaw will allow the government to claw back up to 40% of the compensation that was specifically intended to provide some redress." The call for change is underscored by the fact that many victims have passed away before receiving any compensation, causing their families to face financial repercussions due to government inaction.

The proposed legislative fix, which is also endorsed by the Law Society of England and Wales, aims to rectify the issue known as ‘secondary transfer’. This issue not only affects families tied to the infected blood scandal but could also aid those impacted by the Windrush and Post Office scandals. Emily Deane TEP from STEP expressed her frustration, stating, "It has been months since we first provided HMRC with a straightforward and compassionate legislative fix, and we are still waiting for a response and action. This is completely unacceptable."

In an effort to unite support for this cause, STEP and the Association of Lifetime Lawyers have called upon their 8,000 UK members to contact MPs, stressing the need to eliminate the burdensome secondary transfer of inheritance tax. The urgency and importance of this matter are further demonstrated through meetings held with HM Revenue & Customs and the Infected Blood Scandal Compensation Authority, alongside the release of detailed reports documenting the real-life impacts of the inheritance tax on victims’ families.

In 2024, the UK government allocated £11.8 billion for compensating those affected by the infected blood scandal, following a public inquiry that unveiled efforts to conceal the scale of the issue. Over 30,000 individuals were infected with HIV and hepatitis C during the 1970s and 1980s, resulting in over 3,000 deaths, leaving an estimated 140,000 bereaved family members grappling with the aftermath.

For further engagement, the open letter addressed to the Chancellor can be accessed online, emphasising the urgent need for the government to act decisively against future injustices faced by bereaved families.