The Gazette 1978

GAZETTE

JANUARY/FEBRUARY 1978

charged on each and every item of real property

comprised in his taxable wealth. It is therefore unsafe to

assume that, because the rate of tax is only 1%, the

purchaser's liability for Wealth Tax in the absence of a

Certificate of Discharge would be limited to a fairly small

percentage of the value of the property. The unpaid

Wealth Tax charged on the property could equal or

exceed the total value of the property acquired by the

purchaser.

An individual's "only or principal residence", together

with one acre of garden or grounds, is exempt from

Wealth Tax under Section 7 and does not form part of the

individual's taxable wealth. However, a Certificate of

Discharge from Wealth Tax is necessary even if the

property being sold is clearly an individual's residence, as

the purchaser cannot be certain that it is the individual's

only or principal residence.

Sub-Section (2) of Section 19 provides that real

property shall not, as against a

bona fide

purchaser for

full consideration in money or money's worth or a

mortgagee, remain charged with or liable to the payment

of Wealth Tax after the expiration of six years from the

valuation date upon which that amount of tax fell due.

Furthermore, sub-Section (3) privides that where there

is a

bona fide

sale for full consideration in money or

money's worth or a mortgage of real property, the

property shall not remain charged with tax as against the

purchaser or mortgagee unless the amount of the

consideration or mortgage debt, together with the

consideration or mortgage debt for any other such sale or

mortgage effected between the same parties within the

two years prior to the date of that sale or mortgage,

exceeds in the aggregate £50,000.

There are therefore two cases where a purchaser or

mortgagee can safely dispense with a requisition for a

Certificate of Discharge from Wealth Tax:

(i) Where the consideration on a sale or mortgage is

£50,000 or less and there have been no other sales

or mortgages between the same parties in the

preceding two years — the property is

automatically discharged by Section 19 (3);

(ii) Where the property was on 6th April 1975, 1976

and 1977 beneficially owned by a publicly quoted

company, which is not an assessable person for

Wealth Tax. In any case other than that of a publicly

quoted company, the purchaser or mortgagee

cannot be certain of the facts which allegedly take

the company outside the definition of a Private Non-

trading Company. It is necessary to ensure that

the property is

beneficially

owned by the company.

A publicly quoted bank, for example, might well

own property as a trustee of a Discretionary Trust, in

which case die property would be charged with Wealth

Tax even though the company owning it is not a Private

Non-trading Company.

Section 20 of the Wealth Tax Act deals with receipts for

Wealth Tax and Certificates of Discharge. Sub-Section (3)

provides as follows:

"The Commissioners shall, on application to them

by a person who is an accountable person in respect

of any property, if they are satisfied that any

amount of tax charged on that property and payable

on any valuation date has been or will be paid (or

that no amount of tax is charged on the property),

give a certificate to the person, in such form as they

think fit, to that effect and the certificate shall

discharge the property from liability for tax (if any)

payable on that valuation date, and the certificate

shall, in the case of a bona fide purchaser of any real

property comprised in the property aforesaid for full

consideration in money or money's worth without

notice, exonerate the real property from liability for

tax (if any) payable on that date notwithstanding

any suppression or misstatement in the return. . . . "

You will note that the Commissioners are obliged to

issue a Certificate only to "a person who is an accountable

person". Where a vendor is not an accountable person,

for example, if the vendor is a company other than a

Private Non-trading Company, the Revenue will not issue a

Certificate but will instead normally issue an informal

letter stating that on the facts as disclosed it appears that

the vendor is not an accountable person. Unfortunately,

while a formal Certificate of Discharge is effective in

favour of a

bona fide

purchaser for full consideration

without notice, notwithstanding that the Certificate may

have been obtained by suppression or misstatement, an

informal letter will not discharge the property from tax if it

turns out that the vendor was in fact an assessable person.

It appears however that all that a purchaser can do is to

satisfy himself as far as possible that the vendor is not a

Private Non-trading Company or Discretionary Trust and

hope that the Revenue would not in practice enforce a

charge in a case where they had mistakenly issued a letter

stating that the vendor was not assessable.

Where the vendor is an accountable person for Wealth

Tax he applies for clearance by submitting a formW.20 in

duplicate. This states the assessable person's name, the

capacity in which the applicant is an accountable person,

full details of the relevant property and the valuation

dates in respect of which clearance is sought. The

Revenue complete the Certificate of clearance at the foot

of the form and return one copy to the applicant.

In the case of Wealth Tax the distinction between

conditional and unconditional Certificates of Discharge

does not apply. The form of application for a Certificate is

intended to be used only where a sale is taking place, and

the discharge given by the Certificate is absolute.

Capital Gains Tax

The Capital Gains Tax Act 1975 charges tax at the

rate of 26% on chargeable gains accruing to a person on

the disposal of assets on or after the 6th April 1974.

Generally speaking, a person must be either resident or

ordinarily resident in the State before he can be liable to

Irish Capital Gains Tax. However, Section 4 of the Act

provides that even non-residents shall be liable to Capital

Gains Tax on the disposal of certain assets situated in the

State. In order to ensure that the Revenue will be able to

collect the Capital Gains Tax due by non-residents,

paragraph 11 of Schedule 4 to the Capital Gains Tax Act

provides for a deduction to be made from payment of the

consideration for acquiring cartain assets. The paragraph

applies to the following assets:

(a) Land in the State. Land is defined in Section 2(1)

of the Act as including "any interest in land".

(b) Minerals in the State or any rights, interests or

other assets in relation to mining or minerals or the

searching for minerals.

area within the meaning of Section 1 of the

Continental Shelf Act 1968.

(d) Shares in a company deriving their value or the

greater part of their value directly or indirectly from