Failed PET's and NRB

by **emdlaw** on Mon Nov 02, 2009 11:39 am

I have a client who died recently, he never married. He attempted to make a PET but died 5 years after it had been made. The value of the gift was £235k. Am I right in thinking that the NRB in force at the date of death should be reduced by the value of the gift when it was made?

by **Peter D** on Mon Nov 02, 2009 5:49 pm

You have forgotten the Taper Relief of 20% per year commencing at the completion of the third whole year so that could be 60% depending on the actual dates, remember it is actual whole years not parts of even by a day. Regards Peter

by **maths** on Mon Nov 02, 2009 6:22 pm

Peter D is not quite correct.

In ascertaining the NRB on death, in the example, it is correct to take into account the £235k lifetime gift leaving £90k unused NRB assuming (NRB of £325K at date of death) and no other lifetime gifts.

Peter D's comment relates to working out any IHT charge on a lifetime gift due to death within 7 years thereof; in this regard taper relief reduces any IHT but not the quantum of the gift itself.

by **Peter D** on Mon Nov 02, 2009 7:47 pm

I'm sorry I though that's was what I said. Regards Peter

by **Arnold Aaron** on Mon Nov 02, 2009 11:29 pm

Just for the purposes of clarity...
Taper relief only applies if the gift (or the total of all gifts made in the 7 yrs prior to death) exceeds the nil rate band.

Taper relief only applies to the amount gifted in excess of the nil rate band. e.g. if the nil rate band is now £325k and the gift made 5 yrs ago was £350k, the £25k excess which is liable to IHT will get the benefit of taper relief.

by **emdlaw** on Tue Nov 03, 2009 2:49 pm

Thanks for your replies. I think I get it now. As the gift is below the NRB, the value of the gift when it is made is deducted from the NRB in force at death the remainder is then free to use against other assets in the estate.

Taper relief does not apply as the value of the gift is below the NRB when it was made.

by **andyfrith28** on Fri Jan 07, 2011 1:57 pm

Remember that taper relief doesn't reduce the value of the PET or the CLT, only the tax due. So if the gift doesn't exceed the NRB there won't be any tax due to apply taper relief.

A Frith
Jamieson Christie Wealth Management
01676532210

by **sadssandiford** on Mon Jan 10, 2011 6:37 pm

Hi, im confused, eaisly done!!!!

For example;

If a woman who has a NRB value of £650 (former husbands share not used) gives a gift of £225K on 15 Nov 2006 and then dies on 10 Jan 11 and has an estate of £550k.

How is the IHT calculated???

Is it £550K+£225K-£650K=£125K for IHT

IHT due 40% of £125K = £50K

Taper Relief for PET between 5 and 6 years is 40%

Therefore IHT due is 40% of £50K = £20K

Is this how its worked out???

by **Lee Young** on Wed Jan 19, 2011 6:30 pm

It is 550,000+225,000-650,000 = £125,000 subject to IHT, tax bill of £50,000, paid from the estate

No taper relief as the gifts fall within the nil rate band(s) available.

by **steptoe75** on Wed Jan 19, 2011 7:56 pm

Lee Young wrote:It is 550,000+225,000-650,000 = £125,000 subject to IHT, tax bill of £50,000, paid from the estate

No taper relief as the gifts fall within the nil rate band(s) available.

now i'm really confused..... can i switch some numbers and request a re-crunch??

the gift was 550,000(say the house) and the rest of the estate was 225,000 in valve on death