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Looking after the PETs

It’s happened to us all: you’ve told the client his obligations under the law and the question comes back “Yes, but how will they find out?...” And sometimes the limp but honest answer is “Well, frankly, they probably won’t.”

Nowhere is this more of a problem than in IHT planning: it’s all very well to tell clients that gifts made within seven years before death will remain potentially chargeable: but, truthfully, how many lay executors really check for such gifts as conscientiously as we tell them they should?

Things may be about to change: HMRC have declared that “From now until 31 March 2008, when looking at forms IHT200 received on a death, we will be paying particularly close attention to lifetime transfers. Not only will we be looking at estates where a form D3 has been completed giving details of gifts or other transfers of value, but we will be reviewing other aspects of estates which we know can give rise to lifetime transfers” and go on to warn that “where it appears that the accountable persons have been negligent in not disclosing a gift in the IHT200 we will consider whether a penalty is appropriate.”

Half-a-dozen particular examples which may give rise to unrecognised transfers are given including waiver of loans, withdrawals from joint bank accounts and business transfers. The full text is in the HMRC Trusts and IHT Newsletter for August.