IHTM14012 - Basis of valuation: burden of tax

Transfers which are not PETs ( IHTM04057) are immediately chargeable ( IHTM04067). Further tax may also be payable on an immediately chargeable transfer if the transferor dies within seven years.

The transferor is not liable for any further tax payable on their death.

The transferor is however liable for any tax payable when the transfer is made. Where that tax is paid by the transferor, you can deduct it when valuing the transferor’s estate immediately after the transfer (IHTA84/S5 (4)).

Consequently, with immediately chargeable transfers, you need to know who is bearing the tax on the transfer to quantify the loss to the estate ( IHTM04054)

• If the transferor bears the tax, the loss to the estate includes the tax. So the net gift to the transferee, so far as it is not exempt, has to be grossed up ( IHTM14593) by the amount of the tax to arrive at the value transferred.
• If the transferee pays the tax, the value transferred does not include the tax. So it is not necessary to gross up the transfer.