ARTICLE · 31 JANUARY 2022

Taxation Readers' Forum: Potentially Exempt Transfer

Berg Kaprow Lewis

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‘I have a question on the tax implications of a gift of money towards the purchase of a home. If this money is coming from a joint bank account of parents to an adult child I presume that...

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Writing for Taxation magazine's Readers' Forum, BKL tax consultant Terry Jordan responds to a reader's query about treatment of a payment to a family member for a home purchase.

'I have a question on the tax implications of a gift of money towards the purchase of a home. If this money is coming from a joint bank account of parents to an adult child I presume that this would constitute a potentially exempt transfer (PET) and that the seven-year rule will be applicable.

However, HMRC's Inheritance Tax Manual at IHTM04057 stipulates that a transfer must be made by an 'individual'. If, therefore, one parent dies before seven years, does the gift still qualify as a PET with the surviving parent assuming full responsibility for the original gift which will remain unaffected? Alternatively, does this change the gift from being a PET? If so, what does that mean for the recipient adult child of the original gift?

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