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HMRC internal manual

Inheritance Tax Manual

Liability on potentially exempt transfers (PETs): recourse to transferor's personal representatives

The personal representatives (IHTM05012) of the transferor are liable under IHTA84/S199 (2), but in view of IHTA84/S204 (8) they are liable only to the extent that either

  • because of IHTA84/S204 (2), (3) and (5) no person is liable for the tax (or part of it) under IHTA84S199 (1)(b), (c) and (d)
  • the tax remains unpaid 12 months after the end of the month in which the death occurs.

IHTA84/S204 (2), (3) and (5) are limitations of liability provisions. The liability of the personal representatives is subject to the standard IHTA84/S204 (1) limitation (IHTM30032).

The circumstances in which recourse to the transferor’s personal representatives is likely are

  • where the tax on the value transferred exceeds the value of the asset received by the transferee (IHTM30051) (e.g. the transferee receives a small minority holding of unquoted shares (IHTM18131), but the value transferred on the loss to the estate (IHTM04054) basis is considerably greater)
  • where recovery cannot be obtained from the transferee.

There are more detailed instructions (IHTM30044) on the secondary liability of the transferor’s personal representatives. You must consider the instructions on applications for clearance certificates (IHTM40102) in respect of the free estate where tax on a chargeable potentially exempt transfer (IHTM04057) remains unpaid.