Neither PET actual or deemed is actually charged unless death occurs within the 7 year period. If both are charged then the NRB will be applied to the first actual PET and only the balance if any to the second.
IHTM14692 says:
"When a double charge arises:
- retain the charge on the transfer which produces the higher overall amount of Inheritance Tax, and
- reduce the other transfer to nil."
Taper relief may be available after 3 years (though it is the tax that tapers not the value)
The Manual could be a lot clearer. The Regulations themselves are tortuous but the effect of Reg 5 (3) is that you do 2 calculations. First charge the actual PET, then the second without cumulating the first. So if the values are the same the amount of NRB attaching to each will be the same. The question assumes the values are not different but the Regs have to cater for that possibility hence the credit mechanism. Unfortunately the Schedule does not provide an example of this particular sequence of events within Reg 5.
Jack Harper