The Gazette 1977

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. 196

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