I3.557 Double charges relief—mutual gifts (PETs)
To prevent IHT being paid twice on the same value where a transferor has received back property previously given away, relief is given in some circumstances by the IHT (Double Charges Relief) Regulations 19871. See I3.556 for the general background to these regulations, and for possible instances of double charging for which they give no relief. There is a similar relief given by IHT (Double Charges Relief) Regulations 20052 for cases where IHT avoidance schemes have been unscrambled to avoid paying the pre-owned assets charge.
This article deals first with reg 4 of the 1987 Regulations, which concerns transactions such as the following. A gives property to B by a potentially exempt transfer (PET). B then gives the property (or property directly or indirectly representing it) back to A otherwise than for full consideration in money or money's worth, or dies having left it to A.
A dies within seven years of the original transfer to B, so that it becomes a chargeable transfer, and the property given back by B forms part of A's death estate3. Regulation 4 deals with cases where the chain of events starts with a PET, and reg 7 with cases where it starts with an chargeable lifetime transfer ((CLT) — see I3.558 ).
Limitations of reg 4
• Although reg 4 can apply if the transferor received back property representing the property they originally transferred, once the property comprised in the original transfer or property representing it has been