IHT – When does the seven-year period start?

One of the most basic Inheritance Tax (IHT) mitigation strategies is to make a Potentially Exempt Transfer (PET) and to survive for seven years. It is generally well understood that if there is a reservation of benefit, the seven-year survival period will not start running until the reservation of benefit is removed. Even if there is no reservation of benefit, it is necessary that the transfer of value which is to be potentially exempted shall be a gift, and that the donee should bona fide assume possession and enjoyment of the gifted property in order to start the seven-year period running (s102(1)(a) Finance Act 1986). It is therefore necessary that a gift intended to save IHT should be completed as quickly as possible to ensure that the seven-year survival period starts running as soon as possible.