Compensation paid by banks on dormant accounts opened by Holocaust victims and frozen during World War II will in future be entirely exempt from tax, announced Paymaster General, Dawn Primarolo today.
Ms Primarolo said:
“The Government very much supports the British Bankers’ Association “Restore UK” initiative.
It is right that people who were Holocaust victims, or their beneficiaries, who have monies restored to them under this scheme, should receive not only the original capital but some form of compensation.
I am glad to announce that no tax will be payable on any monies paid out by the banks under this initiative to Holocaust victims or their beneficiaries. This exemption will cover income tax liabilities on any compensation payments as well as death duties in respect of the capital held in the accounts. ”
DETAILS
1. Under a British Bankers’ Association (BBA) initiative, a list of names of those who may have funds in bank accounts that remain unclaimed since being frozen during the war under the Trading with the Enemy Act will be published on the “Restore UK” website (www.restoruk.org.uk). People will be invited to submit a claim where they believe that the monies in an account belong to them, either as the original investor, or as a beneficiary of their estate (either directly or indirectly through the estate of another beneficiary).
2. Where claims are received, the banks will consider the information provided by the claimant and, if at all possible, restore the original account. Where the monies were invested by a victim of the Holocaust and the claimant is either the original accountholder or a beneficiary of the accountholder, the banks have agreed to make an exceptional up-rating payment.
This will restore the purchasing power of the account balance by reflecting inflation which has occurred since the account was frozen. This is more generous than the normal arrangements for interest on dormant accounts, which will apply in other cases where account holders were not victims of the Holocaust. The Banking Ombudsman will intervene where someone is dissatisfied with the handling of his or her claim.
3. More details of the “Restore UK” scheme can be obtained from the website www.restoreuk.org.uk.
4. Under tax law, compensation paid in respect of dormant accounts normally represents interest. The uprating payments which will be paid under the Restore UK initiative are therefore strictly subject to the Tax Deduction Scheme for Interest and the interest would generally be paid by the banks net of tax unless the investor:
is a UK non taxpayer and has completed a registration form R85 to that effect and handed it to his or her bank; or
is not ordinary resident in the UK and a declaration to that effect has been obtained by the bank.
5. Furthermore, death duties (estate duty, capital transfer tax or inheritance tax as appropriate) are potentially chargeable on UK account balances at death (even if the accountholder had no other UK connection). In many cases, any such liability may turn out to be nil or very small but, given the circumstance lying behind these accounts, a significant effort might be involved in determining the correct tax position.
6. In all of the circumstances, the Government has decided that a blanket tax exemption should be given on any compensation paid by the banks in respect of monies restored under “Restore UK” scheme.
NOTES FOR EDITORS
1. Some tax exemptions already exist in respect of payments to victims of National Socialist persecution. Pensions paid to such victims are specifically exempted from UK income tax under Section 330 Income and Corporation Tax 1998. And one-off compensation payments out of designated funds set up by an overseas government for this purpose are exempted from UK Capital Gains Tax under extra statutory concession D50.
2. This tax exemption to payments made under the Restore UK initiative will be set out in a new extra statutory concession which will published by the Inland Revenue in due course.