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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Lifetime transfers: specific lifetime reliefs: gifts with reservation (GWRs): calculations

You must make separate calculations of the total tax payable as a result of the death as follows. Firstly

  • charging the asset subject to the reservation as part of the death estate (or as a deemed potentially exempt transfer (PET) on the date the reservation came to an end if it was before the death) but ignoring the value transferred by the original lifetime transfer, andsecondly
  • charging the lifetime transfer in the usual way as a failed PET or immediately chargeable transfer but ignoringthe value of that property at the date of death or ending of the reservation.

Tax is then charged on the basis of the calculation which produces the higher amount of Inheritance Tax payable.

The credit for any tax previously paid on the lifetime transfer is limited to the amount of tax payable on the death in respect of the GWR property - see example 2 in IHTM14714.

Choose the appropriate calculation before taking into account these credit provisions, even if they operate to turn what was the higher amount of tax into the lower amount.