Regulation 4 Double charges—potentially exempt transfers and death

(1)

This regulation applies in the circumstances to which paragraph (a) of section 104(1) of the 1986 Act refers where the conditions (“specified conditions”) of paragraph (2) are fulfilled.

(2)

The specified conditions to which paragraph (1) refers are—

(a)

an individual (“the deceased”) makes a transfer of value to a person (“the transferee”) which is a PET,

(b)

the transfer is made on or after 18th March 1986,

(c)

the transfer proves to be a chargeable transfer, and

(d)

the deceased immediately before his death was beneficially entitled to property to which paragraph (3) refers.

(3)

The property to which paragraph (2)(d) refers is property—

(a)

which the deceased, after making the PET to which paragraph (2)(a) refers, acquired from the transferee otherwise than for full consideration in money or money’s worth,

(b)

which is property which was transferred to the transferee by the PET to which paragraph (2)(a) refers or which is property directly or indirectly representing that property, and

(c)

which is property comprised in the estate of the deceased immediately before his death (within the meaning of section 5(1)), value attributable to which is transferred by a chargeable transfer (under section 4).

(4)

Where the specified conditions are fulfilled there shall be calculated, separately in accordance with sub-paragraphs (a) and (b), the total tax chargeable as a consequence of the death of the deceased—

(a)

disregarding so much of the value transferred by the PET to which paragraph (2)(a) refers as is attributable to the property, value of which is transferred by the chargeable transfer to which paragraph (3)(c) refers, and

(b)

disregarding so much of the value transferred by the chargeable transfer to which paragraph (3)(c) refers as is attributable to the property, value of which is transferred by the PET to which paragraph (2)(a) refers.

(5)

(a)

Whichever of the two amounts of tax calculated under paragraph (4)(a) or (b) is the lower amount shall be treated as reduced to nil but, subject to sub-paragraph (b), the higher amount shall be payable,

(b)

where the amount calculated under paragraph (4)(a) is higher than the amount calculated under paragraph (4)(b)—

(i)

so much of the tax chargeable on the value transferred by the chargeable transfer to which paragraph (2)(c) refers as is attributable to the amount of that value which falls to be disregarded by virtue of paragraph (ii) shall be treated as a nil amount, and

(ii)

for all the purposes of the 1984 Act so much of the value transferred by the PET to which paragraph (2)(a) refers as is attributable to the property to which paragraph (3)(c) refers shall be disregarded.

(6)

Part I of the Schedule to these Regulations provides an example of the operation of this regulation.