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HMRC internal manual

Inheritance Tax Manual

Lifetime transfers: the charging provisions

The basic provision governing the tax charge on lifetime transfers is IHTA84/S3 (1). The charge may be divided into three parts. The subsection provides that a transfer of value is

  • a disposition, (IHTM04023)
  • made by a person, (IHTM04052)
  • as a result of which the value of his estate immediately after the disposition is less than it would be by the disposition, (IHTM04054)

The value of the transferor’s estate before the transfer excludes any excluded property, (IHTM04251) IHTA84/S3 (2).

Most lifetime transfers are potentially exempt transfers (PETs), (IHTM04057) that is they are only chargeable if the transferor dies within seven years of making the transfer, IHTA84/S3A (1) and (4). But a lifetime transfer may be chargeable as

  • an immediately chargeable transfer, (IHTM04067) or
  • a gift with reservation of benefit (IHTM04071) (GWR).