IHTM04066 - Lifetime transfers: what is the value transferred by a potentially exempt transfer?

There are two ways (IHTM04058) in which a transfer may be a potentially exempt transfer (PET) (IHTM04057).

Where property becomes comprised in the estate (IHTM04029) of another individual or becomes qualifying settled property, you should, as a general rule, calculate the value transferred by a PET by reference to the loss to the transferor’s estate (IHTM04054). However, there can be no grossing up (IHTM14593) because the transferor is not liable for the tax on a PET and the value for tax, but not the value for cumulation, may be reduced if the value of the property falls after the gift. (IHTM14621)

Where a transfer qualifies as a PET due to the increase in value of the transferee’s estate again the loss to the transferor’s estate will be the same as the increase invalue of the transferee’s estate. The straightforward forgiveness of a loan is an example. But this provision may be relevant in other circumstances, such as the omission to exercise a right (IHTM14810). The loss to the transferor’s estate may not always equal the increase in the individual’s estate.

You should refer to Technical any case where IHTA84/S3A (2)(b) appears to apply but the loss to the transferor’s estate exceeds the increase in the transferee’s estate.