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).

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

• transfers that cannot be PETs, (IHTM04061)

• deemed transfers which can be PETs, (IHTM04063) and

• deemed PETs (IHTM04064).