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GAZETTE
MAY/JUNE 1995
47(2) and (3) CATA 1976 do not
protect the purchaser.
Thirdly, from the purchaser's
viewpoint, and more importantly, that
of the purchaser's advisors, the Law
Society's requisitions on title only
require the vendor to discharge any
charge to gift tax, inheritance tax or
probate tax for a period covering the
preceding twelve years. A purchaser
relying on the current requisitions
could only compel a vendor to furnish
clearance certificates for a period
commencing in 1983. The provisions
of Section 47(3) CATA 1976 could
not be relied upon even if the
purchaser was unaware or would not
be aware that a charge to tax arose
outside the twelve year period covered
by the requisitions. Accordingly a
purchaser would have no recourse
against the vendor and
ipso facto,
the
disgruntled purchaser who now has to
either refrain from registering the title
in the Land Registry or discharge the
back tax will undoubtedly turn to his
practitioner to "resolve" the problem.
Accordingly, when purchasing title
based on a possession a specific
clause must be inserted in the contract
and additional requisitions raised
placing the obligation on the vendor
to furnish full evidence of discharge
of any gift tax, inheritance or probate
tax arising since 28 February 1974.
A vendor's solicitor dealing with title
falling within Section 146 should
ensure that prior to a contract being
furnished clear instructions from the
Vendor are obtained and provision has
been made to discharge any
outstanding tax liability from
28 February 1974 which could affect
the property. The vendor should be
advised of the financial expenditure
which this may entail.
The provisions of Section 146 FA
equally apply where a person in
possession of registered land whose
title is based on adverse possession
land and it is intended to register it in
the Land Registry.
For a purchaser, the provisions of
Section 146 Finance Act 1994 are all
the more important when registration
is compulsory either under the
provisions of the 1964 Registration of
Title Act, or because the purchaser is
a statutory authority or the property is
in a compulsory registration county.
A solicitor certifying a title to a
lending institution, must be in a
position to furnish evidence sufficient
to enable an unconditional certificate
of discharge to issue from the
Revenue Commissioners in the name
of the borrower. A building society
will insist upon evidence of discharge
of the tax from 28 February 1974
where the title is to be registered in
the Land Registry. Section 22(4) of
the Building Society Act 1989
precludes a building society from
making a loan where there is a prior
mortgage unless that mortgage is in
favour of the society. Section 2 of the
same Act defines a "mortgage" as
including a charge. Accordingly if
there is a "charge" to CAT, the
society's mortgage could not be
properly taken pursuant to the
provisions of the Building Society Act
1989.
A major difficulty for the applicants
solicitor is that the certificate under
Section 146 Finance Act 1994 issues
to the applicant and not the vendor.
Accordingly, a full investigation and
the disclosure of all dealings with the
land between 28 February 1974 and
the closing date is required and
clearance certificates obtained.
Probate Tax
Since the Finance Act 1993, a
purchaser of property requires
evidence of the discharge of probate
tax where a person dies after 17 June
1993. A difficulty arises however,
where a deceased dies after 17 June
1993 and a surviving spouse becomes
entitled to a limited interest only in
the property created by the Will of the
deceased. The tax borne on the
property in which the limited interest
subsists does not become reduced to
nil but only becomes due and payable
on the death of the person entitled to
the limited interest by virtue of
Section 115A (1) FA 1993. Where a
property is being purchased subject to
such a life interest, an appropriate tax
clearance certificate in respect of that
property will be required on the sale,
unless the property is being sold under
the provisions of the Settled Land Act,
where a life tenant is consenting to the
sale of property in which case a letter
of comfort should be sought from the
Revenue Commissioners. The letter
should identify the deceased, the
property in question, acknowledging
the sale is being made where a spouse
of a deceased obtained a life interest
in property and confirming that the
charge to tax will not arise until the
death of the surviving spouse and that
the liability will then attach to the
executors of the original deceased
spouse's estate. This letter should be
requested from the Revenue
Commissioners and a purchaser
should not close without sight of
same. In addition, the letter should be
specific on the matters outlined
herein.
Conclusion
Professional advisers, when dealing
with a vendor, should make careful
and comprehensive investigations of
all taxation issues.
When dealing with a title based on
possession, whether it is intended to
register same in the Land Registry or
not, a prudent professional adviser
will insist upon clearance certificates
in respect of all dispositions which
could give rise to gift tax, inheritance
tax or probate tax from 28 February
1974 to the date of completion.
Solution
While all practitioners are opposed to
the tax evasion schemes in which
applications based on possession
(commonly known as adverse
possession claims), were utilised in
the past the introduction of the blanket
prohibition on registration has caused
and will continue to cause difficulties
for conveyancers. The difficulty is
that the Finance Act 1994 fails to
recognise that there have always been
a large number of genuine
applications based on possession
every year where the amount of land
involved is minimal. The legislation
has failed to provide a
de minimis
exemption nor has it excluded
transactions where there is no
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