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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Life Policies: Pure Endowment policy linked with a Term Assurance policy: differences between PETA and Discounted Gift schemes

PETA schemes can be distinguished from Discounted Gift schemes (which may also have Pure Endowment and Term Assurance policies) on the basis of the following:

PETA schemes

  • There was a right of surrender of the Pure Endowment policy.
  • No withdrawals could be made by the transferor from the Pure Endowment policy.
  • These were Capital transfer Tax (CTT) avoidance schemes

Discounted Gift schemes

  • There was no right of surrender of the Pure Endowment policy
  • Partial withdrawals by the transferor from the Pure Endowment policy were permitted each year
  • These are CTT/IHT mitigation schemes