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GAZETTE
JANUARY/FEBRUARY 1981
Capital
Acquisitions
Tax
Sections 13 and 73 and
Disclaimers
Interest and Valuation Date
It is well settled that any beneficiary may disclaim a
benefit accruing to him under a will or upon an intestacy.
Most people do not look a gift horse in the mouth and are
only too glad to accept such benefits. When, however, the
acceptance of these benefits gives rise to a claim to Inheri-
tance Tax, one may look to Section 13 of the Capital
Acquisitions Tax Act 1976 for a possible way of avoiding
or reducing any liability to Inheritance Tax. This Section
clearly recognises the principle of Disclaimer with regard
both to absolute interests and interests in settled property.
Not alone does the Section recognise unconditional
Disclaimers, but it also recognises the possibility of a
Disclaimer for a consideration. It does, therefore, open
considerable possibilities for mitigation of Inheritance Tax
in certain cases.
Before exploiting the possibilities of this Section, a
lawyer should look very carefully at the possible effects of
such a Disclaimer. A Disclaimer must not be confused
with an Assignment of a benefit; the person disclaiming a
benefit cannot select the person who in turn will benefit
from his action and the benefit disclaimed will devolve
according to the rules of construction relating to testate or
intestate succession.
In the case of testate succession, the disclaimed legacy
or benefit will pass under the provisions of any "gift
over" in the will or ultimately into residue; a disclaimed
share passing into residue will devolve in accordance with
the residuary provisions of the testator's will or, if the will
is silent, in accordance with the laws of intestate
succession. If the person disclaiming is also a residuary
beneficiary or one of the next of kin, then he may be
brought back into the picture, despite his intention to
disclaim.
This brings one to the consideration of the even worse
problem which arises if the disclaiming party is himself a
member of the class of next of kin taking on an intestacy.
Where does the disclaimed share go? To the remaining
next of kin, as if the disclaiming party had never existed?
Or to the State, under the provisions of Section 73 of the
Succession Act 1965? Section 73 reads as follows:
"In default of any person taking the estate of an
intestate, whether under this Part or otherwise, the State
shall take the estate as ultimate intestate successor."
The Revenue Commissioners have taken the view in at
least one case that the disclaimer of a benefit taken on
intestacy passes to the State under Section 73. Whether
the Revenue will press this view in all cases remains to be
seen and may depend upon the circumstances of each
case.
The opposing argument is that the effect of a
Disclaimer is either to bring in the next interests in title or
simply, where the other interests are of equal degree with
the disclaiming party, to increase the shares of the
remaining beneficiaries.
Unfortunately, it is impossible to give positive advice
as to the effect of Disclaimer in the circumstances
outlined above. This doubt could be removed very simply,
as has been done in several other countries, by intro-
ducing a simple statutory provision to the effect that
where a beneficiary disclaims any benefit, the estate of the
disponer should be distributed as if the disclaiming bene-
ficiary had died immediately before the disponer.
It is understood that a revision of the Succession Act
1965 is pending and this clearly is one of the matters that
should be incorporated in any such revision.
In the meantime and pending any change in the law,
the practitioner should be careful to examine the circum-
stances and should warn the client of the possible adverse
consequences of Disclaimer.
Interest and Valuation Date
It has been argued by a member that the provisions of
Section 41 (2) of the Capital Acquisitions Tax Act 1976
are unfair, inequitable and punitive, having regard to the
fact that interest on C.A.T. is chargeable from the Valua-
tion Date, which in certain cases can be the date of death
itself.
It has been suggested that, in normal cases, at least two
or three months must elapse before an Inland Revenue
Affidavit can be filed and an assessment to C.A.T.
obtained.
The Valuation Date is defined in Section 21 of the Act.
In response to an approach on the subject, the Revenue
Commissioners, Capital Taxes Branch, have replied (28
November 1980) making the following points:
(i) Section 44 of the Act enables the Revenue Commis
sioners to waive interest in certain circumstances;
(ii) if it happens that "it will be two or three months
before an assessment is actually made . . .", neither
the parties nor their solicitors are prejudiced by the
delay in the matter of interest, since it is the practicc
not to charge interest in respect of any period during
which a case is delayed in the Capital Taxes Branch:
(iii) the Valuation Date is, broadly speaking, the date on
which the successor becomes beneficially entitled in
possession, not only to the property but to the income
and profits therefrom. As a corollary, it would not be
unreasonable that the successor should pay interest
due on the tax that is due from that date.
O
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