The Gazette 1979

GAZETTE

APRIL 1979

domicile is not deemed, U.K. assets will, as was in the

case of Estate Duty law, come within the ambit of the

Tax.

These brief comments on this complex piece of legisla-

tion will tend to illustrate certain practical points to be

dealt with later.

CAPITAL ACQUISITION TAX

The most relevant Tax insofar as the subject matter of

this paper is concerned is Capital Acquisition Tax. On the

basis that the Tax has been in operation for five years

with little change in that period, it is assumed that the

basic principles are known and understood. Con-

sequently, it is appropriate to concentrate on aspects of

practical administration of this new concept in Tax law in

relation to deceased Estates.

Accountability and Payment

One of the significant changes following the introduc-

tion of C.A.T. relates to the question of accountability

and attendant consequences — when payable, by whom,

assets chargeable, Certificates of Discharge etc. The due

date for payment of C.A.T. is directly related to the

Valuation date which is not necessarily the date of death

as was the case in the context of Estate Duty. In general

the valuation date is the date on which the

Executor/Administrator assents to the bequest which in

practical terms is usually some little time after the date of

issue of the Grant of Probate. The relevant date would be

when the Executor has title to the assets in question and is

satisfied that the Estate is adequately in funds to the point

of being capable of fulfilling the relevant bequest. In the

circumstances, it will be appreciated that, generally

speaking, the date on which the Tax becomes payable

would be at least several months after the date of death.

To be precise, this is normally within three months of the

date of inheritance i.e. the date of assent or transfer.

The consequences of this in the majority of cases is

that no longer is the Tax payable before the Grant issues

with the result of less delay in awaiting an assessed

Inaland Revenue Affidavit (Form CA24), agreeing values

etc. and arranging finance to discharge the liability

pending sale of assets. One now simply requests the

Revenue to "note" the completed I.R.A. containing

details of the assets and liabilities and this, duly marked,

is then presented to the Probate Office together with the

other relevant documents — Will, Oath of Executor etc. —

to enable the Grant to issue withour undue delay.

Following the issue of the Grant, this will be noted in

the usual way thus putting the assets of the Estate into the

name or control of the Executor who should then be in a

position to discharge the Funeral Expenses, Debts and

other Testamentary Expenses in the first instance. When

these have been discharged, or at least quantified, the

Executor is then in a position to contemplate dis-

tributions in favour of the beneficiaries at which point the

implications of Capital Acquisitions Tax have to be care-

fully considered.

Generally speaking, not only has the due date for the

payment of the Tax changed, the incidence has also in

that the beneficiary is liable for the Tax and is primarily

accountable therefor — the Executor is in fact a

secondary accountable person. Notwithstanding this,

Executors are well advised to take steps to ensure that the

Tax is paid to the point of lodging appropriate Forms IT 3

with the Capital Taxes Branch of the Revenue and in

certain cases withholding the amount of the Tax from

funds to be handed over to beneficiaries.

Having regard to the fact that C.A.T. is a cumulative

Tax, it is appropriate to suggest that the Form IT3 be

signed by the beneficiary particularly in the context that

the Form contains statements regarding previous gifts etc.

received by the beneficiary from the Testator which fact

has, of course, a direct bearing on the rate of Tax

applicable.

Arising from their preliminary examination prior to

marking the Affidavit, the Revenue are entitled where

they consider it appropriate to request a payment on

account of the Tax at that point i.e. before the issue of the

Grant of Probate.

This they would do in cases particularly where the

Executor and/or the Beneficiary are resident outside the

jurisdiction. This is an extreme example but it should be

noted from the wording of Section 60 (3) that the

Revenue have powers to demand payment of Tax in

certain situations as would particularly be the case where

an "external" dimension arises i.e. Executor, Beneficiary

or property is not within the jurisdiction.

Regarding the actual payment of the Tax, considera-

tion should be given to the manner in which payment

might be made in certain instances for example by the

surrender at par of Government securities standing at a

discount — this is a carry forward from the old Estate

Duty legislation but relates only to taxable inheritances -

and by the instalments as provided for in Section 43 of

the Act. This essentially arises in relation to property and

while it does not provide any relief in interest terms, it

does assist cash flow in the context that Tax can be

spread out and paid over five years, the first instalment

falling due one year subsequent to valuation date.

Finally, in relation to the discharge of the Tax liability,

the Executor is obliged to advise the Revenue of any signi-

ficant changes in the composition of the Estate by lodging

a Corrective Account on Form B3 and further the Execu-

tor must take care ultimately to ensure that appropriate

Certificates of Discharge from C.A.T. are available. All

such Certificates are conditional and are generally issued

on the basis of the "facts disclosed" which means that the

Revenue can subsequently reopen the case as they would,

of course, do in the event of new facts coming to light.

Nevertheless, particularly in the matter of determining

values etc., the Certificates of Discharge can have

relevance. It should be noted, however, that notwith-

standing previously accepted values, a sale of property

within three years and agricultural land within six years of

death will normally reopen the valuation question and

could consequently give rise to an additional Tax liability.

From the brief reference earlier to Capital Transfer

Tax, it will be appreciated that a liability to this Tax will

arise in relation to Irish Estates where the value of U.K.

assets is in excess of £25,000 and these assets are

bequeathed other than to the surviving spouse.

In relation to the extraction of a Grant of Probate in

England in the first instance, details of the U.K. assets

must be submitted on Inland Revenue Account Form 201

for assessment of C.T.T. This Tax is payable on

assessment of this Form as was the case in relation to

Estate Duty. Hence, the system is different when com-

pared with the Irish system for payment of C.A.T.