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HMRC internal manual

Inheritance Tax Manual

Lifetime transfers: the charge to tax: grossing: when not to gross-up

If the situation is not one stated on the previous page (IHTM14541), you can treat the transferor’s payment as either

  • a Potentially Exempt Transfer (PET), or
  • a separate chargeable transfer.

You consider annual exemption (IHTM14141) and normal expenditure out of income exemption (IHTM14231) on these additional transfers as usual.

Where the transfer is not grossed up, the instalment facility may be available. The transferor might perhaps take the opportunity to make subsequent payments of the instalments from his own resources.

On the face of it, such payments may seem to suggest associated operations (IHTM14822) under IHTA84/S268. But the mere fact of payment by the transferor is not enough, by itself, to call for further enquiries on those lines.

Grossing is not in point where the transferor makes a loan to the transferee to enable the tax to be paid