The Gazette 1973

Liability for Estate Duty on sale of property in course of Administration

Section 8 (4) of the Finance Act 1894 enacted that Where property passes on the death of the deceased and his executor is not accountable for the estate duty in respect of such property every person to whom any property so passes . . . and every person in whom the same is vested in possession by alienation or other derivative title shall be accountable for the estate duty on the property. Section 32 of the Finance Act 1971 amended Section 8 (4) of the Finance Act 1894 by the deletion of the words "and his executor is not accountable for the estate duty in respect of such property". The section therefore now reads : where property passes on the death of the deceased every person to whom any property so passes for any beneficial interest in possession . . . and every person in whom the same is vested in possession by aliena- tion or other derivative title shall be accountable for the estate duty on the property. Prior to the passing of the Finance Act 1971 leaseholds passing on a death (other than settled leaseholds) and other personal estate vested in the personal represen- tative "as such", and the estate duty thereon was a testamentary expense which the personal representative alone was accountable for and liable to pay. Conse- quently on a sale of leaseholds by a personal represen- tative it was not necessary for a purchaser to obtain any certificate of discharge of such duties. Neither freehold registered land devolving as personal estate under the Registration of Title Acts 1891-1964 nor real estate vesting in the personal representative under the Succession Act 1965, vest in the personal represen- tative as such, but do so by virtue of the respective statutes, and accordingly, the estate duty thereon is a charge upon the property itself under Section 9 of the Finance Act 1894 {Marry v. Drew, 1923, 1 I.R. 35) and a certificate of discharge therefrom was always necessary. Radical change effected The amendment effected by Section 32 of the Fin- ance Act 1971 makes a radical change in the law not alone as regards leaseholds but as regards other prop- erty such as furniture, pictures, horses, motor cars, stocks and shares and other personal property. The advice of counsel has been taken on the subject and he confirms this view. The section in question does not alter the primary incidence or accountability for duty nor does it create a charge for duty which does not already exist; it enlarges the powers of the Revenue Commissioners to recover duty from persons who have derived property on a death where formerly the per- sonal representative was alone accountable. Prior to 1971 on the purchase of leasehold property from an executor the purchaser incurred no liability for estate duty either by reason of duty being a charge on the property or by reason of the ownership carrying with it a personal liability, the only party personally liable being the executor. The effect of Section 32 of the Finance Act 1971 is that on becoming the owner of the leasehold property

the purchaser at the same time becomes accountable under Section 8 (4) of the Finance Act 1894 as amended for the estate duty thereon and therefore also liable to pay it. It therefore becomes necessary for the executor to prove by the production of a certificate from the Estate Duty Office that there is no outstanding claim for duty on the property in order to satisfy the purchaser that by purchasing he does not render himself account- able for and personally liable to pay any unpaid duty on the property. Where duty not formerly paid, valuables now liable to duty It follows from what has been already said that the result is the same in the case of the deceased's pure personal estate or any item thereof. Valuable pictures, furniture, horses, motor cars, china, stocks and shares or other articles which pass to the executor in respect of which duty has not been paid would appear now to carry with them an inherent liability to duty so that a purchaser from an executor or from a beneficiary (fol- lowing an assent) within twelve years of the death which gave rise to the claim for duty must satisfy themselves that no claim for duty attaches to the article in question. The far-reaching results of this amendment do not appear to have been appreciated by the Revenue Com- missioners as it must inevitably result in a very heavy demand for certificates which they may find difficult to meet. Position of bona fide purchaser without notice It is, however, right to point out a feature which may help to reduce the flood of applications for a certificate. Sub-section (18) of Section 8 of the Finance Act 1894 provides that nothing in this section shall render liable to or accountable for duty a bona fide purchaser for value without notice. The phrase "without notice" is awkward. A man is deemed to have notice of a fact of which he would have had knowledge if he had made such enquiries as he ought reasonably to have made. If in the case of leaseholds the liability would have appeared on a proper investigation since 1971 of the title the purchaser within twelve years of the death on which leaseholds pass would seem not to escape if he required no proof of payment of duty. But a man purchasing a picture, horse or like chattel from a stranger at an auction could not be expected to enquire into his title. Buying privately all he could do would be to ask if his vendor had boughtfrom an executor or had these been an executor's sale in the recent history of the chattel. In either case he should then at any rate within twelve years from the death make such enquiries as he could as to the payment of duty. In practice it is thought that except in the case of leaseholds or some particularly valuable chattel at an executor's sale the amendment will not make a serious impact.

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