Sunday, 24 August 2014

Taxable assets

When my mother died, nearly 15 years after my father's death, her estate was comfortably below the threshold for Inheritance Tax to be due.  Had it not been, I very much doubt if I would have taken into account any potential value attached to the medals my father had earned during the Second World War and those earned by his father during the First.  It would simply not have occurred to me.  Just as her clothes - all chain-store purchases - were valueless, the run-of-the-mill crockery had no value, the rusting garden tools also, I would have lumped those medals in with them.  That is not to say that they had absolutely no value to me; I would simply not have considered them to form any part of the estate for tax purposes. 

And that is where, as I have discovered this week, I would have been wrong.

I suppose I have for a long time known that medals could be bought and sold and, therefore, they must have a value.  Or rather, a price.  I don't think the two words are necessarily synonymous.  Those medals are worth more to me than any price at which I could sell them.  But that is not the way Her Majesty's Revenue and Customs look at things.  In their view, medals are salable and therefore have a value.  And that value has to be taken into consideration for the purposes of Inheritance Tax.

But not all medals are classified in this way.  In the eyes of HMRC, there is a distinction between campaign medals and those awarded for gallantry.  Medals awarded for individual acts of heroism or gallantry, such as the Victoria Cross and the Military Medal, may be passed down through the generations without having a taxable value - until they are sold.  Only after the sale to somebody outside that generation-line are they classified as being part of an estate for the purposes of Inheritance Tax.  And that is quite equitable.

But campaign medals are treated quite differently and have to be included in the value of an estate at the estimated price they would fetch at auction.  So my father's Arctic Star, Atlantic Star and so on count as taxable assets.  As does my grandfather's 1914-15 Star.

The "value" of those campaign medals is not actually very high; there are too many of them kicking about for that.  But that is not the point.  I see no reason why they should not be treated in exactly the same way as those gallantry awards.  After all, they weren't awarded simply for opening packets of corn flakes; my father endured the horrors of the Arctic and convoy duty in the Atlantic to earn just two of his medals.  Was that not a form of gallantry?

It is quite possible that even though I am by no means a wealthy person, my estate will be above the Inheritance Tax threshold as that is not being raised in line with the increase in the value of houses.  If that should be the case, I hope my sons will have the nous to say that I passed ownership of those medals to one or other of them years before I died so they fall outside my estate.  Or simply ignore their existence.


joeh said...

Or gift them to your sons now. They will be of no less value to you, they would be displayed and make any visit by you a little more like being at home.

You are right, the inheritance tax can be cruel. Years ago in the states, the threshold was very low, and the tax was applied to widows when their spouse passed. Many widowers were forced to sell the only home they had known for years days after losing a spouse.

That is no longer the case, but in some cases, family farms and businesses still are put up for sale against the desires of the family due to inheritance taxes.

Jenny Woolf said...

I think medals should be kept in the family and so agree very much with you.

Jenny Woolf said...

I think medals should be kept in the family and so agree very much with you.