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Problem- hi sir, when we compute the death tax on CLT we deduct lifetime tax paid .but why we dnt deduct on PET while computing the death tax on PET?
Thanks
Hi Farzana
I am not a tutor but thought of replying to your question:
When any CLT is made including within 7 years prior to somebody’s death IHT (Inheritance tax) is payable when it is made but when PET is made during those 7 years the person doesn’t know that he will die and does not pay any IHT when PET is made within 7 years prior to death. So when life time chargeable transfer on death is done( when person dies), all chargeable transfer during 7 years prior to death is taken into account. Therefore IHT is calculated for both PET and CLT made during those 7 years, but since the person has already paid IHT when CLT was made so it is deducted as life time tax paid from CLT that is calculated on death. IHT was never paid when PET was done. I hope it makes sense.
All the best !Lifetime tax is ONLY payable on CLT’s (look at the name = chargeable lifetime transfer) whereas there is NO tax payable in lifetime on a PET (look at the name = potentially EXEMPT transfer – if taxpayer lives for 7 years it will be exempt!)
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