23 / 262
letter of September 11th, 1972 and hope you will
accept, in explanation, that the delay was due entirely
to pressure of other business. At the outset I agree that
section 33 of the Finance Act, 1972, produces the
effect to which you refer in relation to sales of leasehold
properties by personal representatives "in the course of
administration". It cannot be agreed that this was an
unforeseen consequence of the section. In so far as any
speculation as to the "intention of the Act" may be
relevant it is reasonable to assume that the protection of
the revenue from estate duty may have been the prin-
cipal object of the Oireachtas in this particular instance.
The section in question does not alter the primary inci-
dence or accountability for duty, nor does it create a
charge for duty which did not already exist; it en-
larges the power of the Revenue Commissioners to
recover duty from persons who have derived property
on a death where formerly the personal representative
was alone accountable.
The general rule as to incidence of estate duty is that,
apart from any express direction by a testator or settlor
to the contrary, the duty must ultimately be borne by
the beneficiaries of the property charged in rateable
proportion to their interests in such property. (Finance
Act, 1894, sections 8(4), 9(4) and 14(1); Berry v.
Gaukroger (1903) 2 Ch. 116; In re Owens (1941)
Ch. 17). To this rule there is one notable exception.
Apart from an express direction, the estate duty in
respect of a deceased's free personal property in the
State (including leasehold property) is borne by the
residuary legatee. (In the case of an intestacy, the duty
is borne rateably by all the statutory next of kin). It
is only in relation to the personal estate which vests in
the executor
as such,
that is, the personal estate within
the jurisdiction, to which the Irish Grant applies, that
the estate duty is a testamentary expense; it is not a
charge on the property subject to duty, but a testamen-
tary expense recoverable, like other administration ex-
penses, primarily out of the residuary estate. The
Finance Acts contain no provision enabling the executor
to recover a rateable part of the duty on free, personal
estate from each beneficiary.
Personal property may pass on a death under
various headings. Free personal estate situate outside
the State passes under the will or intestacy of the
deceased; personalty may pass by express trust, by
parol trust, by survivor-ship, by nomination or by
many other titles on a death; personal estate may be
deemed to pass on a death through being the subject
matter of a gift, by being property purchased or pro-
vided by the deceased or by being within any other
category of property deemed to pass on death. In all
these cases tbe estate duty is a charge on the property
over which the deceased had, and exercised by will, a
general power of appointment, vests in the executor and
is available for the payment of the debts of the de-
ceased; In
O'Grady v. Wilmot,
(1916) 2 A.C. 231, the
House of Lords held that it did not vest in the exe-
cutor "as such" and that the estate duty thereon was
not a testamentary expense payable out of the residuary
estate but was a charge on the appointed property
itself. Leasehold property is "personal property" in all
the categories referred to above. It will therefore be
seen that the only leasehold property which does not
bear its own proportion of the duty chargeable on a
death is "free" leasehold property situate in the State
and subject to the Irish Grant of Probate or Letters of
Administration. In relation to the sale of leaseholds
passing or deemed to pass on a death under any other
title, the estate duty is a charge and a prudent pur-
chaser should require a Certificate of Discharge from
Death Duties if it appears from the title that a claim
for duty may have arisen.
Section 8(3) of the Finance Act, 1894, makes the
executor "accountable for the estate duty in respect of
all personal property wheresoever situate of which the
deceased was competent to dispose at his death." It
will be noted that this provision covers a much wider
range of property than the free personal estate situate
in the State and passing under the will of the deceased.
Section 8(4) of that Act (as unamended) provides
that accountability for duty in respect of
all property,
where the executor is not accountable,
falls on trustees,
beneficiaries, alienees "or other person in whom any
interest in the property . . . is at any time vested." The
amendment of section 8(4) of the Finance Act, 1894,
effected by section 33 of the Finance Act, 1971, enables
the Commissioners to recover duty from beneficiaries
and others in any case in which the executor was
formerly the sole person accountable. Cases have oc-
curred, for example, in which executors sold leasehold
properties and distributed the proceeds without regard
to claims for estate duty in respect of such properties.
Gases have also occurred in which foreign executors
sold leaseholds situate in the State in respect of which
claims for duty were outstanding and the Com-
missioners had no means of enforcing their claims. The
amending section is therefore an important Revenue
safeguard and to abandon it would restore the situation
in which serious loss of duty could emerge.
Estate Duty on real estate passing on a death, under
any title whatsoever, is a charge thereon. To this
extent, real property is equated with all other personal
property
other than
the personal estate within the
jurisdiction of an Irish Grant.
As
already pointed out,
leaseholds subject to an Irish Grant are in an anom-
alous position. To remove the charge from real estate
would create a further anomaly rather than be a
"logical extension" of the existing position. In view of
their statutory obligation to protect the revenue, the
Commissioners could not agree to any proposal which
would have the effect of lessening their powers to re-
cover death duties where claims to such duties have
arisen.
In relation to the issue of Certificates of Discharge
from Death Duties I might point out that no prudent
Solicitor should complete the winding up of an estate
without obtaining a Certificate. An executor is entitled
to this protection in his own interest. It should therefore
be assumed that Certificates would be applied for in all
cases before an estate is finally distributed. I might also
point out that sales of leasehold properties by personal
representatives "in due course of administration" can-
not be completed until a Grant has issued. There is
normally, therefore, a time-lag between the agreement
for sale and the final closing of the sale. If a Certificate
is applied for in good time, I see no reason why it
should not be available before the closing date. Nor do
I see any difficulty in the executor indemnifying the
purchaser in respect of any claims for duty which
might affect a leasehold property. After all, the Re-
venue Commissioners were, in effect, providing such an
indemnity up to the date of the passing of the Finance
Act, 1971.
On this question of the issue of Certificates might I
enlist your help in easing a burden which we have to
bear far too frequently? Very regularly we get applica-
tioss for certificates accompanied by a letter which
21