My attention as recently been brought to an inheritance tax relief which presumably was used so rarely that the Revenue did not even produce a pre-prepared relief claim form.
In the light of the current state of the economy there is every likelihood that the relief may be used in far more case.
So what I am talking about? The relief claimed is in respect of potentially exempt transfers (PETs) made within the seven years prior to the date of death, where the value of the PET has fallen upon the date of death.
As an example, if a bachelor testator died in November 2008 with an estate valued at £512,000 in date of death assets and an additional gift of a property valued at £400,000.00 had been made in 2006 (a PET), there would be a tax liability based on the 2008/2009 IHT threshold of £312,000.00 totalling £240,000.00 (40% of £600,000.00).
If between the date of the PET in 2006 and the date of death, the property that was gifted had fallen in value by 20% (£80,000.00), it is possible to claim IHT relief on the loss incurred on the PET of £32,000.00 (40% of the loss) by simple application to the Revenue.
Evidently, this relief will not affect all PETs but if applicable, consideration should be given as to whether or not it may, in the current economy.
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