AEA on Inheritance tax

One small issue to start with – the term AEA is the annual exempt amount which is applicable to CGT whereas the AE is the annual exemption of 3,000 per tax year applied in IHT.
The AE is 3,000 for every tax year and is applied NOT just to transfers to sons and daughters but to PET’s and CLT’s made in the tax year.
CLT’s are charged to IHT at lifetime rates when they are made and then on the death of the taxpayer if within 7 years of the lifetime transfer. The IHT payable on death would then be reduced by taper relief if the donor had survived for at least 3 years from the date of the transfer and then the IHT paid in lifetime would be deducted to establish any additional tax due on death,

This is an interesting question that you pose – that when a taxpayer makes a lifetime gift to another individual (excluding spouse / civil partner) that we would need to consider CGT as well as IHT as a gift represents a chargeable disposal and if the asset is a chargeable asset and the individual is a chargeable person then a gain must be computed based on the OMV of the asset being gifted.
If you turn in your notes to Chapter 26 and read from the penultimate paragraph on page 164 through to the end of the chapter on page 166 you will see this issue explained.
Enjoy!