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GAZE1TE
DECEMBER 1977
Conveyancers will not normally be concerned with
Legacy Duty, as almost all interests in real property are
subject to Succession Duty and not to Legacy Duty.
Section 19 of the Succession Duty Act 1853 and Section
21(2) of the Customs and Inland Revenue Act 1888
provide that legacies of "leasehold hereditaments" or of
"real or heritable estate" or payable out of "monies to
arise from the sale, mortgage, or other disposition of any
such real or heritable estate" will be liable to Succession
Duty and not to Legacy Duty.
In any event, from a conveyancing point of view, the
distinction between Legacy Duty and Succession Duty is
not of any practical importance since the application
which one makes for a Certificate of Discharge from
Death Duties is in respect of all Death Duties as defined
by Section 13 (3) of the Finance Act 1894 and Section
30 of the Finance Act 1971.
This application is made in duplicate on a Form KI
which sets out the name and date of death of the
deceased, whether the property passes by will or
intestacy, and full details of the property in respect of
which the discharge is sought. The Revenue then return
one copy of the form to the applicant having completed
the Certificate at the foot of the page certifying that, upon
the facts as disclosed, there is no outstanding charge for
death duties in connection with the death of the named
person affecting the property described in the application.
The printed form of certificate at the foot of the Form
KI includes a paragraph stating that in the event of a sale
of the property within six years after the death of the
deceased, for a price in excess of the value accepted as the
value for duty, the amount of duty payable may be re-
adjusted. A certificate in this form is normally issued only
in cases where an immediate sale is not contemplated and
the administrator merely wishes to satisfy himself that the
full duty has been paid, subject to the Revenue's right to
re-open values within six years. Where a certificate is
intended to be absolute, this paragraph is deleted by the
Revenue. It is of course essential to the purchaser that the
paragraph should be deleted and that the certificate of
discharge should be absolute or unconditional.
CAPITAL ACQUISITIONS TAX
The Capital Acquisitions Tax Act 1976 introduced
two new taxes, to be called Gift Tax and Inheritance Tax.
Under Section 5 of the Act a person is deemed to take
a gift when he "becomes beneficially entitled in
possession, otherwise than on a death, to any
benefit... otherwise than for full consideration in money
or money's worth paid by him". Section 4 of the Act
provides that a gift is taxable if the date of the gift is on or
after the 28th February 1974, the date of publication of
the Government White Paper on Capital Taxation.
Under Section 11 of the Act a person is deemed to take
an inheritance when he "becomes beneficially entitled in
possession on a death to any benefit... otherwise than
for full consideration in money or money's worth paid by
him". Section 10 of the Act provides that an inheritance
is taxable if the date of the inheritance is on or after the
1st April 1975.
There can be a liability to inheritance tax in respect of a
death prior to the 1st April 1975 if a person becomes
beneficially entitled in possession to a benefit on or after
the 1st April 1975. An example would be where a person
died in 1970 leaving all his property on discretionary
trust and the trustees appointed property to a beneficiary
in 1977.
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If a donor dies within two years after making a
disposition, any benefits taken under that disposition are
deemed to be inheritances and not gifts.
Section 47 of the Capital Acquisitions Tax Act gives
the Revenue a charge over property comprised in a
taxable gift or inheritance and die Section is in somewhat
similar terms to the corresponding Sections governing
Estate Duty and Succession Duty. Sub-Section (1) of
Section 47 provides as follows:
"Tax due and payable in respect of a taxable gift or
a taxable inheritance shall... be and remain a
charge on the property . . . of which the taxable gift
or taxable inheritance consists at the valuation date
and the tax shall have priority over all charges and
interests created by the donee or successor or any
person claiming in right of the donee or successor or
on his behalf'.
Sub-section (2) provides that the property shall not "as
against a bona fide purchaser or mortgagee for full
consideration in money or money's worth, or a person
deriving title from or under such a purchaser or
mortgagee, remain charged with or liable to the payment
of tax after the expiration of twelve years from the date of
the gift or the date of the inheritance".
Sub-Section (3) provides that the tax shall not be a
charge "as against a bona fide purchaser or mortgagee of
such property for full consideration in money or money's
worth without notice, or a person deriving title from or
under such a purchaser or mortgagee".
Section 48 deals with the issue of receipts for Capital
Acquisitions Tax and certificates of discharge from the
tax. 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 of the property of which a taxable gift or
taxable inheritance consists, if they are satisfied that
the tax charged on the property in respect of the
taxable gift or taxable inheritance has been or will
be paid, or that there is no tax so charged, give a
certificate to the person, in such form as they think
fit, to that effect, which shall discharge the property
from liability for tax (if any) in respect of the gift or
inheritance, to the extent specified in the
certificate".
Sub-Section (4) provides that such a certificate shall
not discharge the property from tax in case of fraud or
failure to disclose material facts provided however that
the certificate shall nevertheless exonerate from liability a
bona fide purchaser or mortgagee for full consideration in
money or money's worth without notice of such fraud or
failure and a person deriving title from or under such a
purchaser or mortgagee.
The effect of these Sections is that in any case where
there is a death on the title on or after 1st April 1975 and
within twelve years prior to the purchase with which you
are concerned, it will be necessary to obtain a certificate
of discharge from Inheritance Tax. A certificate will also
be required in respect of deaths prior to the 1st April
1975 if a person has become beneficially entitled in
possession to a benefit otherwise than for full
consideration in money or money's worth on or after 1st
April 1975 and within the twelve years preceding the
purchase. Where there has been a gift inter vivos on or
after 28th February 1974 and within twelve years prior
to the purchase, a certificate of discharge from Gift Tax
will be required.
A transfer of a residence or other property from one
spouse as sole owner to both spouses as joint tenants or