Portal - I am sorry but you are wrong.
Gifts made within 7 years of death will firstly affect the amount available to the trustees of a nil rate band will trust. EG, if a PET of Â£100,000 is made 5 years before death, at today's rates, only Â£175,000 is available to the trustees.
When calculating the 10 yearly/principal charge the calculation one must do is to work out the current value of the "relevant property" (as defined) in the trust and add to that the initial value of any property in a related settlement and the initial value of any "non relevant property" (again as defined) in the settlement. Added to this are the settlor's chargeable transfers in the 7 years before the trust was created and the capital amounts paid out over the last 10 years of the trust (if any).
The calculation is complex.
Sections 64-66 Inheritance Tax deal with this.
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner
Partner, Frettens LLPleeyoung@frettens.co.uk