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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Settled property: lifetime transfers

Transfers that are immediately chargeable to tax

The normal rules (IHTM10831) apply when the termination of an interest in possession gives rise to an immediate charge to tax.

Potentially exempt transfers (PETs)

Where a termination of an interest in possession during a lifetime constitutes a potentially exempt transfer (PET) (IHTM04057) the normal time limit is not entirely appropriate. This is because the 12-month period will often expire before the transferor’s death makes the transfer chargeable. However, the alternative three months period will then apply by reference to the date of the transferor’s death.

If tax is not paid after the due date, others who become liable for the tax (IHTM30011) will also be accountable, IHTA84/S216 (1)(bd). The time limit for delivering an account in these circumstances is 12 months after the end of the month in which the transferor’s death occurs, IHTA84/S216 (6)(aa).