IHTM22076 - Tax burden on death: received lifetime transfers

The same principles as those outlined at IHTM22074 apply in calculating the net benefit to your deceased when they received an earlier chargeable lifetime transfer. Where the transfer was a failed potentially exempt transfer (PET) (IHTM04057) and the transferor died before your deceased they will, as the transferee, normally have been liable for and have to pay the tax.

Example

Tonya gave Belinda £350,000 cash in August 2007. Tonya died in January 2010. She had made no other lifetime transfers. On Tonya’s death the PET became chargeable. After annual exemptions the chargeable transfer was £344,000.

The tax of £7,600 was paid by Belinda, as she was the person liable to pay it.

Belinda dies in July 2011. Quick succession relief (QSR) is now due as there was an increase in Belinda’s estate and is calculated on the basis that the earlier transfer became chargeable at the date of Tonya’s death. The net increase is £336,400 (chargeable transfer of £344,000 less tax of £7,600).

The QSR calculation is:

(£336,400 ÷ £344,000) x £7,600 x 80% = £5,946

In this example, the transferor died before the beneficiary. However, the order of the deaths could be reversed. If

• your deceased received a PET from the transferor, and
• your deceased, as transferee, dies within five years of the PET being made, and
• the transferor then dies within seven years of the PET being made

it is possible that QSR may be due on any tax which becomes payable on the transferor’s later death. This is known as potential quick succession relief or PQSR (IHTM22080).