The Gazette 1978

JANUARY/FEBRUARY 1978

GAZETTE

charged on each and every item of real property comprised in his taxable wealth. It is therefore unsafe to assume that, because the rate of tax is only 1%, the purchaser's liability for Wealth Tax in the absence of a Certificate of Discharge would be limited to a fairly small percentage of the value of the property. The unpaid Wealth Tax charged on the property could equal or exceed the total value of the property acquired by the purchaser. An individual's "only or principal residence", together with one acre of garden or grounds, is exempt from Wealth Tax under Section 7 and does not form part of the individual's taxable wealth. However, a Certificate of Discharge from Wealth Tax is necessary even if the property being sold is clearly an individual's residence, as the purchaser cannot be certain that it is the individual's only or principal residence. Sub-Section (2) of Section 19 provides that real property shall not, as against a bona fide purchaser for full consideration in money or money's worth or a mortgagee, remain charged with or liable to the payment of Wealth Tax after the expiration of six years from the valuation date upon which that amount of tax fell due. Furthermore, sub-Section (3) privides that where there is a bona fide sale for full consideration in money or money's worth or a mortgage of real property, the property shall not remain charged with tax as against the purchaser or mortgagee unless the amount of the consideration or mortgage debt, together with the consideration or mortgage debt for any other such sale or mortgage effected between the same parties within the two years prior to the date of that sale or mortgage, exceeds in the aggregate £50,000. There are therefore two cases where a purchaser or mortgagee can safely dispense with a requisition for a Certificate of Discharge from Wealth Tax: (i) Where the consideration on a sale or mortgage is £50,000 or less and there have been no other sales or mortgages between the same parties in the preceding two years — the property is automatically discharged by Section 19 (3); (ii) Where the property was on 6th April 1975, 1976 and 1977 beneficially owned by a publicly quoted company, which is not an assessable person for Wealth Tax. In any case other than that of a publicly quoted company, the purchaser or mortgagee cannot be certain of the facts which allegedly take the company outside the definition of a Private Non- trading Company. It is necessary to ensure that the property is beneficially owned by the company. A publicly quoted bank, for example, might well own property as a trustee of a Discretionary Trust, in which case die property would be charged with Wealth Tax even though the company owning it is not a Private Non-trading Company. Section 20 of the Wealth Tax Act deals with receipts for Wealth Tax and Certificates of Discharge. 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 property, if they are satisfied that any amount of tax charged on that property and payable on any valuation date has been or will be paid (or that no amount of tax is charged on the property), give a certificate to the person, in such form as they think fit, to that effect and the certificate shall discharge the property from liability for tax (if any)

payable on that valuation date, and the certificate shall, in the case of a bona fide purchaser of any real property comprised in the property aforesaid for full consideration in money or money's worth without notice, exonerate the real property from liability for tax (if any) payable on that date notwithstanding any suppression or misstatement in the return. . . . " You will note that the Commissioners are obliged to issue a Certificate only to "a person who is an accountable person". Where a vendor is not an accountable person, for example, if the vendor is a company other than a Private Non-trading Company, the Revenue will not issue a Certificate but will instead normally issue an informal letter stating that on the facts as disclosed it appears that the vendor is not an accountable person. Unfortunately, while a formal Certificate of Discharge is effective in favour of a bona fide purchaser for full consideration without notice, notwithstanding that the Certificate may have been obtained by suppression or misstatement, an informal letter will not discharge the property from tax if it turns out that the vendor was in fact an assessable person. It appears however that all that a purchaser can do is to satisfy himself as far as possible that the vendor is not a Private Non-trading Company or Discretionary Trust and hope that the Revenue would not in practice enforce a charge in a case where they had mistakenly issued a letter stating that the vendor was not assessable. Where the vendor is an accountable person for Wealth Tax he applies for clearance by submitting a formW.20 in duplicate. This states the assessable person's name, the capacity in which the applicant is an accountable person, full details of the relevant property and the valuation dates in respect of which clearance is sought. The Revenue complete the Certificate of clearance at the foot of the form and return one copy to the applicant. In the case of Wealth Tax the distinction between conditional and unconditional Certificates of Discharge does not apply. The form of application for a Certificate is intended to be used only where a sale is taking place, and the discharge given by the Certificate is absolute. Capital Gains Tax The Capital Gains Tax Act 1975 charges tax at the rate of 26% on chargeable gains accruing to a person on the disposal of assets on or after the 6th April 1974. Generally speaking, a person must be either resident or ordinarily resident in the State before he can be liable to Irish Capital Gains Tax. However, Section 4 of the Act provides that even non-residents shall be liable to Capital Gains Tax on the disposal of certain assets situated in the State. In order to ensure that the Revenue will be able to collect the Capital Gains Tax due by non-residents, paragraph 11 of Schedule 4 to the Capital Gains Tax Act provides for a deduction to be made from payment of the consideration for acquiring cartain assets. The paragraph applies to the following assets: (a) Land in the State. Land is defined in Section 2(1) of the Act as including "any interest in land". (b) Minerals in the State or any rights, interests or other assets in relation to mining or minerals or the searching for minerals. (c) Exploration or exploitation rights in a designated area within the meaning of Section 1 of the Continental Shelf Act 1968. (d) Shares in a company deriving their value or the greater part of their value directly or indirectly from

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