There are two ways (
IHTM04058) in which a transfer may be a
PET (
IHTM04057).
Where property becomes comprised in the estate (
IHTM04029) of another individual or
becomes qualifying settled property, you should, as a general rule,
calculate the value transferred by a PET by reference to the loss
to the transferor’s estate (
IHTM04054). However, there can be no
grossing up (
IHTM14593) because the transferor is
not liable for the tax on a PET and the value for tax, but not the
value for cumulation, may be reduced if the value of the property
falls after the gift. (
IHTM14621)
Where a transfer qualifies as a PET due to the increase in
value of the transferee’s estate again the loss to the
transferor’s estate will be the same as the increase in value
of the transferee’s estate. The straightforward forgiveness
of a loan is an example. But this provision may be relevant in
other circumstances, such as the omission to exercise a right (
IHTM14810). The loss to the
transferor’s estate may not always equal the increase in the
individual’s estate.
You should refer to TG any case where IHTA84/S3A (2)(b)
appears to apply but the loss to the transferor’s estate
exceeds the increase in the transferee’s estate.
