I am dealing with an estate where the deceased was making child maintenance payments to his former wife under the terms of a consent order until the daughter reached 21. The deceased and the former wife agreed the amount. The daughter was 20 on the death of her father and had left full time education at the age of 18. The estate is taxable. I am trying to ascertain whether the maintenance payments would count as PETs. I believe they would not be transfers of value as the deceased was required to make the payments by court under, but I cannot find an exemption to cover this scenario. I am wondering whether it would be covered by section 10 (rather than section 11 where none of the exemptions seem to fit) of the 1984 Act, but I am not sure. Does anyone have any experience of this? Many thanks. James
I agree that s11 is not satisfied as regards payments after 18 in this child’s case. However I think that it is generally accepted that dispositions made under court order including a consent order (which still in theory must be court-approved) come within s10(1)(b). HMRC appear to agree in IHTM04165https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04165
despite the awkward wording of the statute,
As HMRC manual statements cannot be fully trusted, because they themselves can’t be trusted generally, it is anyway sound analysis. The order reduces the value of the estate of the obliged parent. That liability is not gratuitously incurred. When he pays off the liability (the only “disposition” made by him—the Court makes the order) there is no further effect on his estate. So it is not a transfer of value within s3(1).
Jack Harper
It is further possible to
Thanks Jack, that is really helpful. When completing the IHT400 it would seem to be the case that the IHT403 is therefore irrelevant to these payments. I did wonder whether it would be necessary to detail them in the IHT403 and then claim section 10 against them, but this is probably unnecessary if they are not counted as gifts.