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Fall in value relief ― principles

This relief applies to lifetime transfers which incur an additional inheritance tax charge because they were made in the seven years before death. A failed PET or chargeable lifetime transfer is brought into the calculation of the charge on death at the value at the date of transfer. Fall in value relief may be claimed when the value of the gifted property has decreased since the date of transfer.

In order for the relief to be available, the property transferred during lifetime must:

1. •

   still be owned by the donee (or his spouse or civil partner) at the date of the donor’s death, or

2. •

   have been sold by the donee prior to the donor’s death, at arm’s length and for a price freely negotiated at the time of the sale, to a person unconnected with him, and there must be no provision for the donee to re-acquire the property. This is known as a qualifying sale.

IHTA 1984, s 131(1), (3)

Additionally, in order for