IHTM04057 - Lifetime transfers: what is a potentially exempt transfer?

Subject to certain exceptions, a potentially exempt transfer (PET) is a lifetime transfer of value that satisfies three conditions. They are that

  • the transfer is by an individual ( IHTM04053) on or after 18 March 1986
  • it would be a chargeable transfer ( IHTM04027) apart from IHTA84/S3A (or, if only partly chargeable, is a PET to the extent that it would be chargeable), and
  • it is a gift to another individual or to a specified trust, ( IHTM04058). The specified trusts are either an accumulation and maintenance trust ( IHTM16000) within IHTA84/S71 or a trust for the disabled ( IHTM16000) within IHTA84/S89.

So, the starting point is a transfer of value ( IHTM04024) within IHTA84/S3 (1). This is reinforced by IHTA84/S3A (6) which provides that, except as mentioned below, when tax is charged as if a transfer of value had been made, that deemed transfer ( IHTM04025) cannot be a PET. So, as a general rule

  • any transfer of value within IHTA84/S3 (1) can be a PET if the three conditions are satisfied, and
  • a deemed transfer of value cannot be a PET even if those conditions are satisfied.
  • a transfer of value which is wholly covered by an exemption cannot be a PET, it is an exempt transfer. ( IHTM04026)

But the legislation also specifically provides for