How Inheritance Tax is charged: history
Inheritance Tax (IHT) is the successor to Capital Transfer Tax (CTT), which was an integrated lifetime transfer and estates tax. Under CTT, all lifetime transfers were charged to tax when they were made. Under IHT, certain types of lifetime transfer remain taxable when made. Most are only taxable if the transferor dies within seven years of making the transfer. These transfers are known as potentially exempt transfers, or PETs, (IHTM04057) because they will become exempt transfers if the transferor survives for seven years.
Separate legislation exists for charging IHT on settled property that is not held on qualifying interest in possession trusts, otherwise collectively described as relevant property trusts. (IHTM04095)