Payments from army pensions were supposed to be exempt – Navy and RAF pensions are not subject to a tax deduction – and fears are emerging that some people, whose refunds will stretch back over 50 years, could be entitled to large sums ranging from £30,000 to £100,000.
Every soldier who was injured and as a result pensioned out of the army during wars ranging from the Korean War right up to the Gulf War may be affected.
Defence minister Lewis Moonie, said those affected will not lose out, but the Inland Revenue is only obliged to make tax repayments going back six years, so the question of who is going to repay the tax for the earlier years remains unanswered.
PKF tax technical manager Stephen Nixon said it was probable the pensioners would claim off the Ministry of Defence, what could not be obtained from the Revenue.
He added: ‘This situation is quite extraordinary. Normally such situations would be found in Revenue PAYE audits. The situation is exceedingly embarrassing.’
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