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I understand that if the PET is made more than 7 years before the death, it is disregarded as far any inheritance tax calculations are concerned i e Example 2 in the chapter.
However, since trust CLT tax is payable immediately/ 6 months after( plus any paid tax is non refundable) – how we not include previous PET payment in the calculation of the nil band ( and the tax) ?
In example 2 ( in the chapter itself) for the second payment in June 2007, we take the whole available nil band of 300,000. While, we ignore the 100,000 gift a year earlier? If we don’t have the knowledge of when the donor will die and the tax is payable on the spot(or the 6 months after) – How can we ignore the PET payment of the prior year?
In a similar scenario in example 1 we do subtract the 29,000 from the nil band of subsequent CLT payment.
Example 1 is clear. The exclusion of earlier PET payment when calculating the nil band of CLT in example 2 is confusing.
Please advise
Actually, never mind. I just went through Example 1 and it is clear that you ignore the PETs when you calculate the tax for the subsequent CLT’s year. Both examples are consistent. The adjustment where the PET is included in the nil band is calculated after.
Thank you. Great lecturesActually I have different, more interesting question now. I will try not to answer it myself.
In practice question 38. in example 1. Should we regard all verball contracts unenforceable after death of the primisor ( I think)? It seems that in both examples verbal agreements are ignored – medical expenses and legal fees. I guess, there’s no way to prove contract existed in the first place?
Sorry, don’t mean to get too much into the weeds.
Thank you.Yes, these verbal promises to pay do not represent a legally enforceable debt for purposes of determining the chargeable estate at death. If the beneficiaries want to provide the person concerned with that money that is up to them but it is not a liability owed by the taxpayer at the date of death so will not serve to reduce the value of the estate upon which IHT is charged.
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