Dear Sirs,

If I were to gift, say, £50,000 to one of my daughters who, finding she has no immediate use for the money, wishes to lend it back to me, repayable on demand, and at a reasonable rate of interest, would that £50,000 be considered a PET and would the debt, should it still exist on my demise (more than seven years from now), be repayable and so be outside my estate for IHT purposes?

Best, Darren


Dear Daren,
I have something in common with the youth of the land – I never watch live TV. Like many, I practise promiscuity with streaming services – you know the thing, three months with Netflix, two months on Amazon Video, 1 month on I-Player and so on. If you haven’t perused it, might I commend The Wire to your attention. One of the principal characters, Stringer Bell, chairs a meeting of middle ranking and wannabe drug dealers at which he chides one of participants for taking notes [on a legal pad] on a criminal conspiracy.

You might recall we had a Crime Minister: our neighbours shuddered in consternation on his assault on language and logic by proclaiming he was pro cake and eating it.

Your question, which has been  presented to me in various iterations,  and with the frequency with which a toddler asks its mother a question – I’m considering having a T-shirt made, put me in mind of the phrase eating one’s cake and
having it.

You’re right on the point of the PET.  When you give assets away as part of your inheritance tax planning,  they are potential exempt transfers, PET. The potential {for exemption of the asset from your estate for inheritance tax] rests on you surviving the gift by seven years. However, when you give away things to avoid inheritance tax, when you make a gift to remove assets from your estate, you must use the word gift in the ordinary sense of the word – we’ll do well to understand a gift as something given without the occurrence or the expectation of reward, consideration or exchange.

In your query, you have outlined a clear sequence in which your object is to batter the law,  bloody the language and bludgeon logic. As you aim to avoid inheritance tax on your estate, this stratagem of your elucidation, as the original  owner of the cash is doomed to failure. You are planning to give away the wedge with the clear intention of having use of it.
I consulted my 8-year-old niece if she thought this was a gift, she snorted in derision, then laughed: she laughed so long and so hard her mother’s thought was of fear that the poor lass had an asthma attack. To return to the land of the adults, laid out in these steps with the aim of having use of an asset you’d previously given away, in the jargon, you’re planning to make a gift with reservation of benefit.

As an inheritance tax saving stratagem, it would be a waste of time and effort destined to bear the same fate as the Sinclair C5, destined to be mentioned in the same breath as the DeLorean Motor Car, destined to be regarded with the same style of awe that anyone had the slightest notion that the Maginot Line would be nowt but the gold standard of failure.

Be certain, we can overcome this problem of gift with reservation of benefit, but, as they say in France,
that’s another pair of sleeves.
So, don’t be like Stringer Bell’s subordinate, don’t take notes on a planned crime, and, despite what that
Crime Minister said, in your heart of hearts, you know you can’t eat your cake and have it.

Stay well, do good work, stay in touch,

Ade  Oduyemi