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HMRC internal manual

Inheritance Tax Manual

Lifetime transfers: deemed transfers that are potentially exempt transfers

There is one deemed transfer of value (IHTM04025) that is a potentially exempt transfer (PET). (IHTM04057) This is the deemed transfer under IHTA84/S52, but only if the transfer was on or after 17 March 1987. The requirement that the transfer is by an individual (IHTM04053) is met by IHTA84/S3 (4) and IHTA84/S3A (7). The other two conditions must still be met to for a release of a life interest (IHTM16000) to qualify as a PET.

This means that a release of a life interest between 18 March 1986 and 16 March 1987 cannot be a PET and is therefore an immediately chargeable transfer. (IHTM04067) This is because as originally enacted IHTA84/S3A (2) prevented a gift from being a PET if it resulted in

  • settled property (IHTM16000) becoming comprised in an individual’s estate (IHTM04029) or
  • an increase in the value of settled property already comprised in it.

An amendment contained in F(No 2)A 87/S92 removed this restriction so that a release of life interest could qualify as a PET.