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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Lifetime transfers: when does property becomes comprised in the estate of an individual?

Under IHTA84/S3A (2)(a), property (IHTM04030) which becomes comprised in the estate of an individual (IHTM04053) will be a PET (IHTM04057). The most obvious example is an outright gift of cash from one individual to another.

Example 1On 1 January 1998, A gives B a cheque for £200,000.

The gift satisfies the condition in IHTA84/S3A (2)(a). It is a PET, except so far that it may be an exempt transfer. (IHTM04024)

Example 2On 1 January 1998, A settles £200,000 on trust for B for life with remainders over.

As B has an interest in possession (IHTM16000) in the trust, the gift satisfies the condition in IHTA84/S3A (2)(a). It is a PET, except so far that it may be an exempt transfer.

Because of this condition, transfers which

  • do not result in the transferee receiving property which becomes comprised in their estate, for example the release of a debt, and
  • are not to individuals, for example, on discretionary trusts or to companies, cannot be PETs under IHTA84/S3A (2)(a) – although they may be PETs under IHTA84/S3A (2)(b) if the estate of another individual is increased. (

IHTM04060)

PET treatment for gifts by way of renewal premiums on life policies is discussed at IHTM14000.