The Gazette 1995

GAZETTE

MAY/JUNE 1995

47(2) and (3) CATA 1976 do not protect the purchaser.

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 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, the closing date is required and clearance certificates obtained. Probate Tax Since the Finance Act 1993, a purchaser of property requires

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

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 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 been made to discharge any outstanding tax liability from

exemption nor has it excluded transactions where there is no

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