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HMRC internal manual

Inheritance Tax Manual

Definition and extent of liability (lifetime transfers chargeable when made): extent of liability of persons secondarily liable

IHTA84/S204 (6) provides that a person liable for tax under IHTA84/S199 otherwise than as transferor (IHTM30071) is liable

  • only if the tax remains unpaid after the due date for payment (IHTM30153)


  • to no greater extent than they would have been had the value transferred been reduced by the unpaid tax (even though the transferor may have been liable for the grossed up (IHTM14540) amount of the transfer).

Example 1

The first chargeable transfer made by A is a cash gift of £240,000 to the trustees of a discretionary (IHTM16042) settlement in January 2000.

The settlement is not one within IHTA84/S3A (1)(c). The tax is to be paid by A, so the gift is grossed up to £242,250 and the tax liability is £2,250. A fails to pay the tax. The liability of the trustees under IHTA84/S199 (1)(c) is for tax on £240,000, i.e. £1,800.

Example 2

The facts are as in Example 1 but A pays £1,000 towards the tax. The liability of the trustees is then calculated as if the value transferred were reduced by the tax unpaid.

The gross value of the gift (as before) = £242,250, less unpaid tax -£1,250 = £241,000.

The liability of the trustees = tax on £241,000 = £2,000, less tax paid - £1,000 = £1,000.

Where the liable persons are transferees, beneficiaries and/or vestees the same conditions apply as for PETs (IHTM30051).