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Spring Seminar of Solicitors in Galway
on Tax Law
The Spring Seminar of the Society of Young Solicitors
was held in the Great Southern Hotel, Galway, on 25th
and 26th March 1972. The seminar was arranged with
the Association of Provincial Solicitors, and there was a
large attendance of 250. The first very technical paper
was given by Mr. Joseph Charleton, Accountant, on
"Shares in Private Companies and Estate Duty". He
emphasised that the Finance Act, 1965, was mainly
devised to stop up loopholes in Estate Duty which had
been discovered by the combined wits of the legal and
accountancy profession. In practice almost every source
of income goes on producing capital and it is a simple
and effective process to capitalise the annual income
tax return. Examples of those who would benefit by
this form of capitalisation would be : (1) The family
businessman who has built up a large business in his
sole name with business properties and a good house.
His life insurance might often be inadequate. In this
case the businessman should doubtless convert his busi-
ness into a limited company and make a settlement of
the shares among his family. As regards trading com-
panies, the control will eventually be decided by the
destination of the profits when formed, and, in effect,
the gift comprised in the settlement must be uncondi-
tional, absolute and final. In the new company, in order
to avoid heavy taxation, the settlor must make himself a
minority shareholder. He must divest himself of control,
and he will only feel safe when the five years period has
elapsed.
(2) The private individual with a large portfolio of
investments and a good house. Here the keypoint's the
intention of the settlor. Where he is likely to be sur-
vived by his wife and children, perhaps the best way is
to make certain outright gifts to his wife and arrange
that she and himself are minority shareholders in the
family investment company which will be mainly for his
children and other relatives.
Mr. Garrett Gill, S.C., gave the second lecture on
"Trusts and Settlements", and emphasised that the
commonest form of settlement until recently was the
marriage settlement. However, recent legislation, in par-
ticular Section 28 of the Finance Act, 1965, and Section
41 of the Finance Act, 1971, had drastically limited the
benefits to be derived from such a course. The word
"Settlement' has been differently defined at various
times by various Acts, and cognisance would have to be
taken of Section 2 of the Settled Land Act, 1882,
followed by the decision of Palles C.B. in
Attorney-
General v Power
(1906) 2 I.R., and of Kenny J. in re
Oranmore and Browne—Revenue
Commissioners v.
Royal Trust Co. Ltd.
(1971). The useful exemption to
estate duty under Section 5 (2) of the Finance Act,
1894, was also fully considered. A wider definition of
the term "Settlement" was provided by Section 20 (5)
of the Finance Act, 1949, as amended by the Finance
Act, 1941, and by Section 21 of the Finance Act, 1961.
The lecturer stated that the Revenue Commissioners
are in the happy position of making words mean what
they want them to mean, and the broad definition was
thus carried further in Section 447 of the Income Tax
Act, 1967.
Before 1965, with regard to discretionary settlements,
there was no estate duty payable on the death of any
of the class of possible beneficiaries save in very excep-
tional circumstances. There are excellent precedents of
discretionary trusts in successive editions of Potter and
Monroe's
Tax Planning,
which are worth consulting.
In considering the framing of discretionary trusts, the
following provisions will have to be taken into consid-
eration : (1) Section 28 of the Finance Act, 1961, as
amended by Section 35 of the Finance Act, 1971; (2)
Section 21 of the Finance Act, 1965; and (3) Sections
438, 443, 444 and 445 of the Income Tax Act, 1967.
The effect of each of these sections will require very
careful consideration.
The next paper was given by Mr. P. J. Egan, Prin-
cipal Inspector of Taxes, on the Irish Value Added Tax
which is to be introduced on 1st November 1972. The
present system of sales tax was changed primarily as a
requirement of entry into the Community (although the
Italians have wisely refrained from introducing it yet).
Other alleged advantages are that "it makes evasion
more difficult and that it will relieve the element of
double taxation", doubtless by vastly increasing the
cost of living. Value Added Tax is a tax on consumer
expenditure which is levied in direct proportion to the
price of goods and services supplied regardless of the
number of stages in the production. The total tax is
collected from the person who sells the goods or renders
the services. The following are the essentials of liability
to this t ax: (1) A taxable activity must be carried on;
(2) by an accountable person; (3) from whom consid-
eration must accrue. Taxable activity includes the de-
livery of goods and the rendering of services in the
course of exercising any trade, vocation or profession.
Goods given a zero rating in the Second Schedule are
completely exempt from tax. The term "goods" in-
cludes most movable and immovable objects, including
all land and buildings. Any person who delivers taxable
goods or renders a taxable service in the course of
business is deemed to be an accountable person. Far-
mers, fishermen and certain small traders can elect to
be exempted, and special arrangements will be applied
to landlords, solicitors, accountants, and veterinary
surgeons. An accountable person is required to furnish
to the Revenue Commissioners particulars which will
enable them to register him.
Goods coming into the State will be taxed at the
same rate as the delivery of goods within the State.
It is to be noted that, on the delivery of land and
buildings, where chargeable to lax, and on building
work and repairing and maintaining buildings, only
60 per cent of the consideration is chargeable. The
normal consideration is that agreed upon at the time
the goods are delivered or the services are rendered.
It is to be noted that all building work, and the
"delivery" of lands and buildings has been brought
within the scope of this tax. However, there is no lia-
bility on the sale of agricultural land or on the sale of
houses already built and occupied before November 1st
next. A purchaser will have to pay this tax in respect of
any house built after 1st November 1972 but will not
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