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GAZETTE
JANUARY/FEBRUARY 1978
CONVEYANCING: INVESTIGATION OF TITLE
TAXATION REQUISITIONS II
by
Roderick Buckley, Solicitor
(Part I of this Article which appeared in the December, 1977, Gazette, dealt with Death
Duties and Capital Acquisitions Tax.)
WEALTH TAX
The Wealth Tax Act 1975 imposed an annual charge to
Wealth Tax at the rate of 1% of the net market value of
the taxable wealth of individuals, discretionary trusts and
private non-trading companies as of 5th April 1975 and
each subsequent 5th April.
The Minister for Finance in his Budget Speech on 1st
February 1978 has announced the abolition of Wealth Tax
with effect from 5th April 1978. Wealth Tax will therefore
not be payable in respect of the year 1978, and 5th April
1977 will be the last valuation date for the tax. However,
so far as is known at present, requisitions regarding
Wealth Tax will continue to be relevant up to 5th April,
1983, as Wealth Tax unpaid in respect of 5th April 1975,
1976 or 1977 will continue to be a charge on real
property comprised in the assessable person's wealth for
6 years after the relevant valuation date.
In order to decide whether Wealth Tax was payable on a
property it may be necessary to consider whether the
owner of the property as of 5th April 1975, 1976 or
1977 was a Discretionary Trust or Private Non-trading
Company within the meaning of the Act. The
definition of Discretionary Trust is contained in Section
1( 1) of the Wealth Tax Act, as amended by Section 49 of
the Finance Act 1977. The definition is extremely wide
and includes many trusts which would not normally be
considered as Discretionary Trusts. For practical purposes
it can be taken that almost every trust is deemed to be a
Discretionary Trust, and where trustees appear on the title
of a property on 5th April 1975, 1976 or 1977 a
Certificate of Discharge from Wealth Tax should normally
be obtained.
The definition of a Private Non-trading Company is
contained in Section 6 of the Wealth Tax Act, as
amended by Section 50 of the Finance Act 1977. A
company will be a Private Non-trading company if and
only if it satisfies all of the following criteria:
(i) The number of shareholders (excluding employees
who are not directors of the company and any
shareholder who is such as nominee of a beneficial
owner of shares) is not more than 50;
(ii) It has not issued any of its shares as a result of a
public invitation to subscribe for shares;
(iii) It is under the control of not more than five
persons (an individual, his relatives, nominees and
partners being all deemed to be a single person);
(iv) Its income in the twelve months preceding the
valuation date consisted wholly or mainly of
investment income, i.e., income which if the
company were an individual would not be earned
income within the meaning of Section 2 of the
Income Tax Act 1967;
(v) Its property on the relevant valuation date
consisted wholly or mainly of property fromwhich
that investment income is derived.
A body corporate which would otherwise be a Private
Non-trading Company is deemed not to be a Private Non-
trading Company if either
(a) It is under the control of a body corporate which is
not a Private Non-trading Company or
(b) the market value of the company's property on the
relevant valuation date is represented as to not less
than 90% thereof by the market value of shares in
or debentures of a body corporate which is not a
Private Non-trading Company and of which the first
body corporate has control. This latter provision
applies only in respect of the 1977 valuation date.
Most Irish companies other than those quoted on the
Stock Exchange will fulfil the first three requirements for
a Private Non-trading Company. In order to determine
whether the company is liable to Wealth Tax it is then
necessary to look at whether most of its income in the
twelve months preceding the valuation date, was
unearned, for example, dividends or rent, and whether its
property on that valuation date consisted mainly of
property producing that unearned income. This latter
requirement is included so as to provide exemption in
respect of a company which is primarily a trading
company and whose assets consist mainly of trading
assets but which in a particular year makes little or no
trading profit and might otherwise be deemed to be a
Private Non-trading Company if it was in receipt of a small
amount of unearned income.
The exemption in favour of companies under the
control of a body corporate which is not a Private Non
trading Company is intended to exempt investment
subsidiaries of publicly quoted companies or of other
companies that are not Private Non-trading Companies.
Some companies which are essentially trading
operations find it convenient to have the trade carried on
by an Operating Subsidiary, all of whose shares are owned
by a holding company. If the Operating Subsidiary were to
pay a dividend to the holding company and if the various
other requirements outlined above were fulfilled, then the
holding company would be liable to Wealth Tax as a
Private Non-trading Company. The exemption at (b) above
is intended to favour such a company.
Property situated in Ireland is liable to Wealth Tax,
regardless of the residence or domicile of the individual,
Discretionary Trust or Private Non-trading Company
owning the property. The only circumstance in which
property in Ireland is not liable to Wealth Tax is if it is
owned by an entity other than an individual, Discretionary
Trust or Private Non-trading Company, for example, if it is
owned by a publicly quoted company or by a company
whose income in the twelve months preceding the relevant
valuation date derived mainly from trading.
Section 19 (1) of the Wealth Tax Act provides that tax
due in respect of the taxable wealth of an assessable
person shall "be and remain a charge on any real
property comprised in the taxable wealth of the person."
Unlike the corresponding provisions for death duties and
Capital Acquisitions Tax, Section 19(1) does not restrict
the charge on any particular item of real property to the
Wealth Tax payable in respect of that particular property.
The entire unpaid Wealth Tax of an assessable person is
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