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HMRC internal manual

Inheritance Tax Manual

Lifetime transfers: the charge to tax: the charge on lifetime transfers: grossing-up the values

You need to calculate the gross value of the transfer, including the tax burden, if the tax is to be paid by the transferor. In such cases, grossing reflects the fact that the tax burden effectively increases the loss to the transferor’s estate. (IHTM14547)

Generally, grossing only applies to immediately chargeable transfers. It does not apply to failed potentially exempt transfers (PETs) (IHTM04057) unless the transferor is obliged to pay the tax. It does not apply to additional charges (IHTM14572).