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HMRC internal manual

Inheritance Tax Manual

Liabilities: investigating form IHT419: double charges following disallowance of a debt under FA86/S103

There will be situations where disallowing a debt under FA86/S103 will lead to double charges.


  • On 10 March 1998 Xavier makes a PET of £10,000 cash to Yasmin.
  • On 4 April 1998 Yasmin lends £10,000 to Xavier.
  • Xavier dies on 3 May 2000.

The cash becomes a failed PET (IHTM04057) and the debt is disallowed. In effect there is a double charge to Inheritance Tax.

Regulation 6 of the Inheritance Tax (Double Charges Relief) Regulations 1987 (SI1987/1130) prevents this situation arising.

The general principle is that whichever of the two transfers results in the higher overall liability to tax remains chargeable and the value transferred by the other is reduced. This means that we will either

  • tax the gift and allow the debt, or
  • disallow the debt and reduce the gift.