Lifetime transfers: the charge to tax: immediately chargeable transfers: cumulation
You calculate the tax on transfers on or after 18 March 1986 by cumulating the values of all other immediately chargeable transfers in the preceding seven years.
You do not include Potentially Exempt Transfers (PETs) (IHTM04057) in the cumulation.
Bob transferred £250,000 into a discretionary trust on 1 April 2010. Bob had previously made the following transfers
- Feb 2003, £30,000 to a discretionary trust
- May 2006, £80,000 to a discretionary trust
- July 2008, £60,000 to a friend.
You calculate the lifetime tax (IHTM14534) on the April 2010 transfer on the basis of
- Previous chargeable transfers = £80,000
- April 2010 transfer + £250,000
- Total = £330,000
The Feb 2003 transfer is omitted from the previous lifetime transfers because it is outside the seven year period.
The July 2008 transfer is omitted because it is a PET.
- £330,000 - £325,000 (IHT nil rate band at date of transfer) = £5,000
- Multiply this by 20% (half death rate (IHTM14534)
- = £1,000 tax to pay on the transfer