IHTM22076 - Tax burden on death: received lifetime transfers
The same principles as those outlined at IHTM22074 apply in calculating the net benefit to the deceased under an earlier chargeable lifetime transfer. Where the transfer was a failed PET (IHTM04057) and the transferor died before your deceased, the transferee (your deceased) will normally have been liable for and have to bear the tax.
Example
Tonya gave Belinda £250,000 cash in August 1997. Tonya died in January 2000. She had made no other lifetime transfers. On Tonya's death the PET became chargeable. The tax calculation was:
Value transferred |
£250,000 |
Less annual exemptions |
£ 6,000 |
Chargeable transfer |
£244,000 |
The tax of £5,200 was paid by Belinda, as she was the person primarily liable.
Belinda dies in July 2001. QSR is based on an increase in Belinda's estate of:
Chargeable transfer |
£244,000 |
Less tax |
£ 5,200 |
Net increase |
£238,800 |
The full calculation is:
(238,800 ÷ 244,000) |
× |
5,200 |
× |
80% |
= |
£4,071.34 |
In this example, the transferor died before the beneficiary. However the order of the deaths could be reversed. As a PET becomes chargeable on the transferor's death within seven years of the PET, it is possible for tax to become payable on a PET after the death of the transferee. If this happens, and the transferee has died within five years of the PET being made, it is possible that QSR may be due on any tax which becomes payable on the transferor's later death. This is known as potential QSR or PQSR (IHTM22080).
Exceptionally there may have been a lifetime transfer to your deceased that was chargeable when made - For example, an interest in possession in settled property, that ended in the deceased's lifetime, before 17 March 1987. If the transfer was within the five years before your deceased's death, there will be:
- QSR for the tax already paid, and
- PQSR if the amount of tax due on the transfer is increased because the transferor died within seven years of making the transfer.
