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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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