Lifetime transfers: what is a potentially exempt transfer?
You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.
Subject to certain exceptions, a potentially exempt transfer (PET) is a lifetime transfer of value that satisfies three conditions. They are that
- the transfer is by an individual (IHTM04053) on or after 18 March 1986
- it would be a chargeable transfer (IHTM04027) apart from IHTA84/S3A (or, if only partly chargeable, is a PET to the extent that it would be chargeable), and
- it is a gift to another individual or to a specified trust, (IHTM04058).
So, the starting point is a transfer of value (IHTM04024) within IHTA84/S3 (1). This is reinforced by IHTA84/S3A (6) which provides that, except as mentioned below, when tax is charged as if a transfer of value had been made, that deemed transfer (IHTM04025) cannot be a PET. So, as a general rule
- any transfer of value within IHTA84/S3 (1) can be a PET if the three conditions are satisfied, and
- a deemed transfer of value cannot be a PET even if those conditions are satisfied.
- a transfer of value which is wholly covered by an exemption cannot be a PET, it is an exempt transfer. (IHTM04026)
But the legislation also specifically provides for
- transfers that cannot be PETs, (IHTM04061)
- deemed transfers which can be PETs, (IHTM04063) and
- deemed PETs (IHTM04064).