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GAZETTE
DECEMBER 1991
Capital Acquisitions Tax
On the other hand, section 79
Finance Act, 1989 imposes a
surcharge. Where the estimate of
the market value (the "estimated
market value") of any asset
comprised in a gift or inheritance
and included in a self-assessment
return, when expressed as a
percentage of the value ultimately
ascertained ( " t he ascertained
value") is within any of the follow-
ing percentages, the surcharge
indicated is payable:
Surcharge as %
of Tax
(a) The estimated market value is
equal to or greater than 0% but less
than 40% of the ascertained value
30%
(b) The estimated market value is
equal to or greater than 40% but
less than 50% of the ascertained
value
2 0%
(c) The estimated market value is
equal to or greater than 50% but
less than 67% of the ascertained
value
10%
(d) The estimated market value is
equal to or greater than 67% of the
ascertained value
Nil%
Chronologically, section 79 Finance
Act, 1989 introduced the idea of a
surcharge for undervaluations of
property. It is a necessary
ingredient in the concept of self-
assessment and although its
impact and philosophy in capital
acquisition tax is similar to that
applying in stamp duty, the net
effect is not as harsh.
In both cases, the surcharge
appears to be mandatory although
there are powers of remission in
both codes, which may apply to
surcharges. This means that unless
a case to remit is presented to the
Revenue the surcharges wi ll
automatically apply.
Stamp duty appears to differ from
the capital acquisitions tax
provision in the following ways:
(a) There is no minimum difference
applicable to CAT. Unless the
difference exceeds £5,000 for
stamp duty, no surcharge arises at
the lowest penalty rate.
(b) The differences are looked at
from different perspectives in both
taxes but they both provide the
same answer:
For example
Submitted value on £150,000;
Ascertained value £200,000
For stamp duty purposes, the
difference is 25% of the
ascertained value.
For CAT purposes, the submitted
value as a % of the ascertained
value is 75%.
Consequently there would be a
penalty for stamp duty but none
for CAT.
For this reason it must not be
assumed that because a surcharge
is avoided for CAT purposes, that it
is automatically avoided for stamp
duty purposes. Similarly, because
of the £5,000 " f l oo r" for stamp
duty purposes, it cannot be
assumed that the avoidance of a
stamp duty charge on that ground,
avoids a surcharge for CAT.
Stamp Duty and Nagligence
Provisions
Section 103 is complicated by the
provisions of Section 97 of the
Finance Act, 1991 which provides
that where all the circumstances
affecting a transaction cannot be
set out in the instrument, they
must be set out in a statement to
accompany the instrument. Any
person interested in or concerned
in or about the making of that
instrument (or statement) and who
is guilty of any fraud or negligence
(negligence is a new provision) will
be liable to a penalty of £1,000
together with the difference (or in
the case of fraud, twice the
difference) between the stamp
duty that should be payable and the
stamp duty that would have been
payable on the submitted facts.
For example, if through some
negligence a solicitor is in default
under this section the following
could result:
(a) The client could be liable under
the surcharge provisions of
section 103 for anything
between 50% and 200% of
the duty together with the
penalty provisions of section
97.
(b) The solicitor, under Section 97
could be liable for £1,000 and
100% of the difference in the
duty. This latter penalty could
also apply to any other person
concerned in or about the pre-
paration of the instrument
(valuers, brokers, bankers)
including the taxpayer and
these penalties would be
cumulative:
Ascertained value £200,000;
Submitted value £150,000
Surcharge: 50% Rate of stamp
duty 3%
Client:
Stamp duty
£6,000
Surcharge
£3,000
Penalty
£1,000
Difference
£1,500
Solicitor: Penalty
£1,000
Difference
£1,500
£14,000
CAT and Secondary Liability
On the other hand, the capital
acquisitions tax provisions of
section 79 are confined solely to
the accountable person. However,
an "accountable person" is defined
in the Principal Act as a person who
is primarily accountable and a
person who is secondarily
accountable (which would include
a solicitor in certain circum-
stances). That of itself does not
make the solicitor, qua solicitor,
liable for the CAT surcharge
although it may make him liable as
solicitor qua accountable person.
However, under section 94 Finance
Act, 1983 (Revenue Offences) any
person who knowingly aids, abets,
assists, incites or induces another
person to make or deliver, knowingly
or wilfully, an incorrect return,
statement or account, in connection
with any tax (which includes CAT
and stamp duty) will be liable to a
penalty under that section.
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