10 yearly charge, previous PET

Year 1 – Individual makes a PET of £325K
Year 3 – Individual makes a CLT into Trust of £325K
Year 9 – Individual dies

On death, the PET in year 1 is exempt as it has been made more than seven years since death. The CLT uses the NRB.

However, for the purposes of the ten year charge, ‘any chargeable transfers made by the settlor in the seven years prior to the start of the trust are taken into account’. (IHTM42086 and IHTM42255)

Does this therefore include the PET in year 1, even though it is exempt on death?

Thanks in anticipation.

Ihsan Ali
I Will Solicitors Ltd

A PET is only a chargeable transfer if it occurred within 7 years of death and is not to be taken into account when calculating any lifetime IHT.

It is only if the death occurs within 7 years after the date of the PET that the IHT is reworked to take account of the fact the failed PET is no longer an “exempt transaction”.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

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