BN 32 - Dormant Accounts Of Holocaust Victims

Who is likely to be affected?

1. Holocaust victims, or their heirs, receiving certain compensation payments made in relation to dormant accounts. In particular those receiving payments made under the Restore UK initiative or the Claims Resolution Tribunal arrangements for dormant accounts in Switzerland.

General description of the measure

2. This measure, which was first announced in July 2005, will exempt payments made by foreign banks and building societies from tax. It also takes the opportunity to legislate an existing Extra Statutory Concession, A 100, which already exempts payments made by UK banks and building societies under the Restore UK initiative.

Operative date

3. The exemption will apply to payments made in the tax year 1996-97 or any later year of assessment.

Current law and proposed revisions

4. The July 2005 announcement stated that the exemption would apply whenever such payments were made. However, the commencement date for the exemption has been changed to 1996-97 because extensive research and discussions with interested parties indicate that this revised date should cover those who should benefit from the exemption, whilst avoiding the significant complexity associated with the possibility of reopening tax liabilities from earlier years.

5. Primary legislation will provide that in order to qualify for the exemption the original account holder must be a “victim of National-Socialist persecution”. This means those persecuted on the basis of race, religion, physical or mental disability or sexual orientation. The exemption will cover payments, which represent both interest that should have been credited to the account and also revaluation of the original balance to take account of inflation during that period.

6. The legislation will add an additional provision to the Income Tax (Trading and Other Income) Act 2005 to exempt the payments from income tax. Similarly, a provision will be added to the Taxation of Chargeable Gains Act 1992 to exempt any gain arising on the disposal of a right to receive the payments. The legislation will also include an exemption for any additional inheritance tax (IHT) (or earlier taxes) that may have arisen to an estate from rights to an original bank account immediately prior to inception of the scheme concerned. By contrast, actual payments from a scheme will form part of the IHT estate of those who receive them in the normal way.

Further advice

7. If you have any questions about this change, please contact Elspeth Fearn on 020 7147 2849.