IHTM30113 | The settlor: PETs

This instruction applies where

• a potentially exempt transfer (PET) (IHTM04057) is made on the lifetime disposal or termination of an interest in possession in settled property (IHTM16091) during the lifetime of the settlor and

• the PET proves to be a chargeable transfer by reason of the transferor’s death (the transferor is the person who had the interest in possession before the disposal or termination).

Example

Sebastian settled property on Lucy for life with remainder to Robert absolutely. During Sebastian’s lifetime, Lucy and Robert bring the settlement to an end by executing a deed under which Robert becomes immediately beneficially entitled to the whole of the settled property.

The ending of Lucy’s life interest is a PET and she is the transferor.

Lucy dies within 7 years.

In respect of transfers of value and other events occurring on or after 17 March 1987, IHTA84/S201 (3A) provides that the settlor is not liable under IHTA84/S201 (1)(d) for tax on a PET in this kind of situation if

• the settlement was made before 17 March 1987

• the trustees were resident in the United Kingdom when the settlement was made, and

• the trustees have not been resident in the United Kingdom at any time between 16 March 1987 and the death of the transferor.