Gallantry Awards Pension

Gr7340

Hi All,
I left the military in 2011 with a DFC gallantry award. Over the next couple of years I heard that this meant that my pension was tax free. In 2013 HMRC agreed with me that this was the case. For the last 7 years my pension has been tax free. In January HMRC wrote to me and told me that this was a mistake on their part. I know that at least 100, maybe more, servicemen and women are effected by this change. I feel for those who left the military and were relying, as I did, on this tax free income for life.
How can they just change their interpretation of the rules? I spoke to many people over the 5 years, every year asking them to confirm that this entitlement was correct, this was not one persons error, this was clearly policy. They seem to have changed this policy with no notice or consideration of the impact on the financial plans that people have made based upon their decision. I have declared all my earnings all my life, I’m not Starbucks or Amazon. Why do HMRC feel they can go after the soft targets? Is there any precedent for challenging this reversal of interpretation based upon the fact that the financial decision I have made over the past 7 years, the jobs I have taken, the choices I have made were all based upon the agreement with HMRC?
Hope someone can offer some light for all those of us that served and fought for this country only to be harrassed for even more tax!

unforeseen

EIM 74307 & Section 638 ITEPA 2003 are the relevant HMRC regulations.

It only applies to your military pension and not state pension.

Andy_L

unforeseen wrote: »

It only applies to your military pension and not state pension.

I don't think its even that good, It applies to an annuity and an additional pension granted to recipients of the awards not to your regular AFPS

Only the VC & GC get an annuity (£10k pa IIRC) whlist the additional pension was abolished for awards made after 2003, and was only about £10 pa anyway (I suspect it was a victim of never being increased in line with inflation over the years)

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/341329/07_JSP764_Part7_July14_amd6.pdf

unforeseen

I thought VC was £100 per year

Andy_L

unforeseen wrote: »

I thought VC was £100 per year

Osborn raised it in the 2015 budget from ~£2kpa

Silvertabby

INCOME TAX AND NATIONAL INSURANCE (ANNUITY AND ADDITIONAL PENSION) TAX STATUS
0301 The annuity for VC and GC and the additional pensions that are paid to holders of named Gallantry awards for valour are exempt from tax under Section 638 ITEPA 2003 and EIM74307 !!!8211; Pensions: particular occupations: armed forces: awards for bravery.
0302 Tax exemption applies only to the annuity and additional pension. The Armed Forces Pension remains liable for UK Tax.

Only the additional pension (if paid - ceased for all awards but VC and GC in 1993) is/was tax free. The additional pension for all gallantry awards, other than the VC and GC, was barely £10 per annum.

War pensions remain tax free.