Commentary

I3.560A Double charges relief—examples

IHT, trusts and estates

I3.560A Double charges relief—examples

I3.560A Double charges relief—examples

Example 1—mutual PETs

In September 2017 X gave Y a holding of shares valued at £360,000.

In October 2018 X settled £341,000 on discretionary trusts, the trustees bearing the IHT of £3,200.

In December 2019 Y gave the shareholding back to X.

On 6 November 2020 X died with an estate valued at £802,000, including the shareholding now valued at £402,000. X had always used his annual exemptions.

The IHT payable is the higher of:

PET included but shareholding ignored in death estate
September 2017 PET now chargeable to IHT at 80% of death rates (taper relief)
(360,000 – 325,000) × 40% × 80%
£11,200
October 2018 additional IHT on chargeable transfer, IHT at 40% (NRB exhausted)£136,400
Deduct: Lifetime IHT3,200
£133,200
6 November 2010—death
The shareholding in X's estate is disregarded, so estate is £(802,000–402,000) =£400,000
IHT at 40% (NRB exhausted)£160,000
Total IHT payable by reason of X's death £(11,200 + 133,200 + 160,000) =£304,400
PET ignored but shareholding included in death estate
September 2017 PET ignored.
October 2018 additional IHT on chargeable transfer.
IHT at death rates on (341,000 – 325,000)£6,400
Deduct: Lifetime IHT3,200
Additional IHT payable£3,200
6 November 2010—death.
IHT at 40% on £802,000 (NRB exhausted)£320,800
Total IHT payable by reason of X's death £(3,200 + 320,800)

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