An exempt transfer and a PET do not require reporting as they are not chargeable transfers: s216 IHTA. HMRC’s main cross-check is that page 8 of IHT403 requires reporting of normal expenditure gifts. If a client wishes comfort in lifetime, all an adviser can do is write to HMRC and seek confirmation that the facts support the exemption. If the total cumulation of such gifts goes over the NRB the taxpayer has a legitimate expectation that HMRC would give or refuse that confirmation because, subject to the annual exemption, the excess would be a CLT requiring reporting and payment of tax if not exempt. This would then not be hypothetical or tax avoidance-orientated. See https://www.gov.uk/guidance/non-statutory-clearance-service-guidance
If they are churlish and fob you off the only redress is JR. If their response is Wednesbury unreasonable you could threaten to take action and seek costs. I usually slip in the words “legitimate expectation” somewhere in the clearance application. I was always conscious that any significant interaction with HMRC is potential litigation from the outset so the LSS is worth revising, particularly pages 37-8 on the above magic words. Most of the LSS is propaganda, and thus pompous tosh, but those who put their heads above the parapet, whatever their ulterior motives, deservedly risk readers taking them at their literal word. https://assets.publishing.service.gov.uk/media/65a56f8d867cd800135ae8db/HMRC_Resolving_tax_disputes.pdf
Needless to say HMRC is likely to want all the info which would go into boxes 20-22 of IHT403 if your client was dead and may try to discourage you by asking continually for more detail; but even that has a finite end if you and the client have the patience and the cost of fees is not too sensitive. The downside of all clearance applications is that it may be necessary to disclose all manner of info about a client’s affairs. for which HMRC have an insatiable appetite, with no guarantee of a favourable outcome or indeed where the clearance is not statutory, any response at all. Richard Bishop has posted on here about his unsatisfactory responses to these applications for clearance https://trustsdiscussionforum.co.uk/t/gifts-out-of-income-are-regular-gifts-received-income/26882/16
Jack Harper