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HMRC internal manual

Inheritance Tax Manual

Lifetime transfers: the charge to tax: potentially exempt transfers (PETs): tax treatment of a PET

A PET (IHTM04057)

  • is not chargeable at the time it is made
  • becomes chargeable if the transferor dies within seven years of the transfer (it is then a “failed PET”)
  • is an exempt transfer if the transferor survives the transfer by seven years or more (it is then a “successful PET”).
  • While the transferor is still alive, they only need to tell us about the PET if they make an immediately chargeable transfer in the same or following income tax year and need to work out the annual exemption (IHTM14141) that remains available.

You do not bring the PET into cumulation for the immediately chargeable transfer at the time it is made, but you will do so later if you need to consider additional charges (IHTM14571) when the transferor dies.