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If the transferor pays the IHT on a chargeable lifetime transfer (CLT — see I3.319), their estate has been reduced by the IHT on the transfer, as well as by the disposition giving rise to the tax charge, and so this IHT constitutes part of the value transferred by the transfer of value¹.

This is because IHTA 1984, s 5(4) provides that the liabilities taken into account in valuing a person's estate immediately after a transfer of value include the transferor's liability for IHT² on the transfer (but not any other tax).

IHTA 1984, s 162(3)(a) provides that the IHT is not to be discounted even though it is not immediately due (see below for what happens where the tax ends up being paid by someone other than the transferor). This means that the value transferred by the transfer, apart from the IHT on it, must be grossed up to arrive at the amount of the IHT on it³.

There is no such liability of the transferor and no grossing up where a transfer