Potentially Exempt Transfers (PETs)

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Section 3A of the Inheritance Tax Act 1984 provides provisions specifically for Potentially Exempt Transfers (PETs). A PET is a transfer of value which is made during the lifetime of an individual; in other words, it is a gift of an asset and provided certain conditions are met, the PET can be exempt from IHT. The conditions which must be met are: The individual must have made the transfer on or after 18th March 1986. It must be a gift to another individual or to a specified trust. No benefit from the transfer must be retained. Individual must survive 7 years for the full value of the asset to fall completely out of the Estate for tax purposes. Where the death occurs after 3 years following when the transfer was made, taper relief applies and has the effect of reducing the tax liability on the transfer rather than the full…

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