IHT PET

Question 2

What is a PET

Answer 2

Any gift made to individual that is not/above exemptions
- chargeable if donor dies within 7 years
- tax due paid by recipient
- Value = value of gift - any exemptions

Question 3

What is a Chargeable Lifetime Transfer

Answer 3

If not exempt gift or PET including:

1. Gifts to Trusts
   - UNLESS charitable trust or Bare Trust
   - Bare trust is when beneficiary is in control of asset and will be treated as PET
2. Gifts to Companies
   - rare to just give gift to company

Question 4

How are Chargeable Lifetime Transfer taxable?

Answer 4

Immediately

(Value of CLT) - (remains annual exempt amount from same year £3000) - (remaining annual exempt amount remaining form last year £3000) - (remaining life time nil rate band £325k)

Remember annual exempt amount of £3000 pa may be used up by previous PETs but can use any remaining for year before

Question 5

Tax Rate for CLT?

Answer 5

After deducting exemption and nil rate band
- if trustee pays taxed at 20%
- if donor pays taxed at 25%

Question 6

How must be calculate CLT if there are more than one?

Answer 6

They cumulate
- so must to take into account of CLTs made 7 years before CLT we are considering
- deduct the annual exemptions
- deduct CLT chronologically from current Nil Rate Band until this is used up
- pay either 20% or 25% on excess

Question 7

How to calculate tax for PETs?

Answer 7

Only if donor dies within 7 years
1. look back from 7 years of earliest PET
2. consider if you can deduct annual exemptions from any CLT or PET
3. subtract CLT and PET from Nil Rate Band
4. Tax remaining value of PET at 40%
5. Consider if Taper applies

Question 8

How does Taper Relief for PETs work?

Answer 8

Means that only percentage of the TAX PAYABLE needs to be paid depending on time of death of donor after gift

• 3-4 years after gift: 20% relief (pay 80% of tax)
• 4-5 years after: 40% relief (pay 60% of tax)
• 5-6 years after: 60% relief (pay 40% of tax)
• 6-7 years after 80% relief (pay 20% of tax)

Question 9

What if CLT is within 7 years of death?

Answer 9

Treat same as or pets
1. look back from 7 years
2. consider if you can deduct annual exemptions from any CLT or PET
3. subtract CLT and PET from Nil Rate Band
4. Tax remaining value at 40%
5. Consider if Taper applies
6. deduct Life time tax already paid (if over no refunds)