§ Mr. GreenwayTo ask the Chancellor of the Exchequer what advice his Department has given to the Ministry of Defence about the eligibility of retired disabled officers in receipt of a pension granted on account of medical unfitness attributable to military service to(a) have their pensions exempted from income tax and (b) be awarded a refund of tax wrongly deducted from their pension; and what advice it gave on whether such entitlement should be backdated to the date of discharge. [72853]
§ Mr. BoatengThe Inland Revenue has provided advice over a number of years to the Ministry of Defence on matters relating to the taxation of pensions granted to disabled officers. The Inland Revenue has advised that the tax legislation exempts from income tax
retired pay of disabled officers granted on account of medical unfitness attributable to or aggravated by naval, military or Air Force service".Unless a pension was granted because of a disabling condition attributable or aggravated by service, the statutory exemption will not apply.
1201WThe Inland Revenue has further advised that where the Veteran's Agency (VA) or one of its predecessors has made an award in respect of a disability which is attributable to service, it is prepared to treat the VA award and any service pension in payment as one combined and tax exempt pension from the date of the VA award.
Where tax has been wrongly deducted from an exempt pension, the Inland Revenue has advised that the tax should be refunded and backdated to the date on which an attributable pension was first granted.