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GAZETTE
APRIL. 1984
Finance Bill, 1984
Submissions of Law Society's Taxation Committee
1. Certificates of Discharge — Section 109
The Society welcomes the proposal for the issue of
Certificates of Discharge to Executors and persons
having secondary liability. The proposed sub-section,
however, stipulates that the Certificate cannot be issued
until a period of two years after the valuation date. This
could, therefore, impose a possible delay of three years in
winding up Estates — even the smallest Estates — and
payments to beneficiaries. It is suggested that the Section
should impose no constraints on the Revenue Commis-
sioners relating to the issue of Certificates as and when
they think appropriate. The Society is perfectly happy
that the Revenue Commissioners will, as always, exercise
such discretion fairly and reasonably. If a time limit is
removed, it may in fact not merely expedite the
completion of administrations and payments to
beneficiaries, but it will also indirectly help to expedite the
payment and discharge of tax. Accordingly, the Society
requests that this time restraint be removed and the
matter be left exclusively to the discretion of the
Commissioners.
2. Discretionary Trusts — Part V, Chapter 1 —
Sections 100-105
The Society does not question the concept of taxing
Discretionary Trusts where same are used to avoid or
defer payment of Capital Acquisition Tax. There appears,
however, to be an unintended consequence of the
provisions. For example, an Estate of between £ 100,000 /
£150,000, might be left to Trustees upon Discretionary
Trust for a spouse and the inheritances subsequently
arising would not attract any Capital Acquisition Tax on
the appointment to the beneficiaries. In other words, the
purpose of the Discretionary Trust here is simply to give
flexibility in the administration of the Testator's Estate
and not to avoid or defer tax. Nevertheless, in the example
quoted, the beneficiaries would suffer a tax liability of
between £3,000/£4,500. The Society believes that this was
not intended and to avoid this hardship, submits that the
following exemptions should be given:—
(i) The tax should not be charged on a Discretionary
Trust if the Trust Funds are distributed or are
appointed out of the Trust within two years of the
death of the Testator.
(ii) There should be no tax on a Discretionary Trust
where the Trust Fund does not exceed £150,000 and
the principal objects are as defined in Section 100. It
is also submitted that the definition of 'principal
objects' in Section 100, should be extended to
include persons to whom the Disponer stands in
loco parentis.
There are times when a nephew or
niece or other relative being orphans or otherwise
not having the benefit of parents (and who cannot
for technical reasons perhaps, be adopted), become
assimilated into a household and effectively, part of
a family. The Society strongly submits that the law
should recognise this situation. The Society further
submits that the phrase '
in loco parentis
' is
sufficiently clear in law not to require any further
definition but would not of course oppose any
definition to prevent abuse.
3. Aggregation — Section 107
The Society feels that there may be an unintended
consequence of the new aggregation rules, which could
result in hardship or unfairness, especially to a surviving
spouse. For example, under the provisions proposed in
the Bill:—
(a) 3rd June, 1982, — Spouse received gift of £20,000
from her brother or inherited £20,000 from the
Estate of a deceased brother. No tax is payable.
(b) 20th June, 1984, — Spouse received gift of £10,000
from her husband. There is an immediate tax
liability of £1,500 (and of £2,000 if it were an
inheritance).
This is so notwithstanding that the spouse has not
exhausted or used any of her tax free threshold of
£150,000 from her spouse. In the long term, this could
produce even greater hardship where a benefit taken by a
spouse from a parent after 2nd June, 1982, is aggregated
with benefits received from the other spouse twenty or
more years later, giving rise to a substantial tax liability
on perhaps relatively modest provisions made for the
surviving spouse.
This is particularly so in the case of retired persons
(especially public officials or representatives) who have
not accumulated capital or have disposed of their capital
on the education of children or otherwise and the main
provision for a widow is the family home and a pension.
The capitalised value of the pension together with the
family home and contents, aggregated to such gifts or
inheritances, will frequently give rise to a liability for tax
with no liquid assets to pay same.
To overcome this problem, the Society suggests:—
(a) the definition of 'revised class threshold' be omitted
from the Section and any necessary amendment be
made in Para. 3 to ensure that any allowance for
previous tax is calculated using the same class
threshold, viz. notional tax.
(b) alternatively, that there should be no aggregation in
the case of gifts or inheritances by a spouse to a
spouse of earlier gifts or inheritances from uncon-
nected sources.
4. Spouse
The Society again submits that the time has come to
review the position of a surviving spouse and to consider
either totally exempting gifts and inheritances between
spouses, increasing the reliefs or exempting pensions or
giving some ease on similar lines. The value of ordinary
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