BaronessStrange asked Her Majesty's Government:
Why, in the Armed Forces (Pensions and Compensation) Bill, the guaranteed income stream for war widows is to be taxed when the guaranteed income stream for disabled personnel is tax free. [HL1540]
§ Lord BachThe Armed Forces (Pensions and Compensation) Bill is enabling legislation and does not, therefore, contain details of the new pension and compensation arrangements for the Armed Forces, which will be set out by order in statutory instruments. However, the details of the schemes have been provided to the Libraries of both Houses as framework documents.
116WAAll benefits paid under the new Armed Forces compensation scheme to former members of the Armed Forces will be tax-free, in the same way as for attributable benefits under the current Armed Forces pension scheme and the war pension scheme.
Again in line with the current Armed Forces pension scheme attributable benefits paid to dependants under the new compensation scheme, including those for widows, will be taxable where provided in the form of regular payments. This is because the benefits when paid to the service person are regarded as compensation for injury, but when paid to a dependant are considered as income. The taxable nature of the widow(er)'s guaranteed income stream (WGIS) has been taken into account in setting the level of benefits in the new compensation arrangements.