IHTM14513 - PETs: cumulation
Calculate the tax directly chargeable on a PET (IHTM14512) by cumulating the values transferred by chargeable transfers in the seven years preceding the PET.
Chargeable transfers which need to be cumulated include both
- immediately chargeable transfers (IHTM14531), and
- failed PETs, (namely, only PETs within seven years of the death which have become chargeable because of the death.)
Where a chargeable PET exceeds the IHT threshold (IHTM14515) either before or after cumulation, it is “chargeable in its own right”.
Example
Trevor makes the following transfers (net of exemptions and reliefs) before his death in September 2001:
50,000 to son in January 1992
60,000 to discretionary trust February 1992
75,000 to son April 1996
200,000 to son in January 1999
The tax payable on the three earliest transfers is nil because when adding all the previous transfers, they do not exceed the IHT threshold at the date of death, £242,000.
The cumulative value of the January 99 PET is however
|
Feb 92 Apr 96 Jan 99
|
60,000 75,000 200,000 335,000 |
This exceeds the threshold applying at the date of death
|
|
335,000 -242,000 93,000 |
x40% = £37,200 tax to pay on the PET |
The transfer in January 92 is more than seven years from the date of death and so is a successful PET. It is omitted from cumulation.
The transfer in February 92 is also outside seven years from the death, but was an immediately chargeable transfer. It is within seven years of the January 99 PET and so must be included in the cumulation calculation for the PET.
