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HMRC internal manual

Inheritance Tax Manual

Lifetime transfers: the charge to tax: additional charges: introduction

Additional charges arise where a transfer was:

  • immediately chargeable (IHTM04067), and
  • the transferor dies within seven years.

Initially you should recalculate the tax on the transfer as if it were a potentially exempt transfer (PET) (IHTM14513), at the full death rate. You then compare the recalculated figure to the liability at the time of the transfer (lifetime rates are normally half the death rates).

If the recalculated figure is higher than that at the time of the transfer, you charge the difference. This is the additional tax charge.

If the recalculated figure is lower than that at the time of the transfer, do not repay the difference.

You can follow the examples later in this section.

The main factors affecting the recalculation are:

  • the value for tax, which is not always the same as previously (IHTM14572)
  • the cumulation, which may now include PETs (IHTM14573)
  • the rate of tax (IHTM14574), and
  • taper relief (IHTM14575)

If the chargeable transfer was made before 18 March 1986, you only calculate additional tax if the transferor died within three years of the transfer.