IHTM14503 - How lifetime transfers are brought into the charge for tax: cumulation with the death estate
Calculate tax on the death estate by cumulating the values transferred by chargeable transfers in the seven preceding years.
Cumulable chargeable transfers include both
Example
Trevor makes the following transfers (net of exemptions and reliefs):
50,000 to son in January 1992
75,000 to discretionary trust in June 1996
50,000 to daughter in January 1998
Trevor dies in October 2000 with a death estate of 200,000
The cumulable value for tax on the death is
|
June 96 Jan 98 Death estate
|
75,000 50,000 200,000 325,000 |
The gift in January 92 is outside seven years of the death and so is omitted.
If the lifetime transfers exceed the IHT nil rate band before adding the death estate, you will need to
- deduct any tax attributable to the lifetime transfers from the total tax charge. In effect, the tax on the death estate will be simply 40% x chargeable value of the death estate.
You will also need to separately consider cumulation on PETs and immediately chargeable transfers themselves. If a lifetime transfer exceeds the nil rate band after cumulation, tax is directly chargeable on that transfer. It is “chargeable in its own right”.
The sections later in this manual will guide you on how to consider cumulation and calculate tax on
- PETs (IHTM14511),
- immediately chargeable transfers (IHTM14531), and
- additional charges on immediately chargeable transfers because of a death(IHTM14571)
