The Gazette 1979

APRIL 1979

GAZETTE

domicile is not deemed, U.K. assets will, as was in the case of Estate Duty law, come within the ambit of the Tax. These brief comments on this complex piece of legisla- tion will tend to illustrate certain practical points to be dealt with later. CAPITAL ACQUISITION TAX The most relevant Tax insofar as the subject matter of this paper is concerned is Capital Acquisition Tax. On the basis that the Tax has been in operation for five years with little change in that period, it is assumed that the basic principles are known and understood. Con- sequently, it is appropriate to concentrate on aspects of practical administration of this new concept in Tax law in relation to deceased Estates. Accountability and Payment One of the significant changes following the introduc- tion of C.A.T. relates to the question of accountability and attendant consequences — when payable, by whom, assets chargeable, Certificates of Discharge etc. The due date for payment of C.A.T. is directly related to the Valuation date which is not necessarily the date of death as was the case in the context of Estate Duty. In general the valuation date is the date on which the Executor/Administrator assents to the bequest which in practical terms is usually some little time after the date of issue of the Grant of Probate. The relevant date would be when the Executor has title to the assets in question and is satisfied that the Estate is adequately in funds to the point of being capable of fulfilling the relevant bequest. In the circumstances, it will be appreciated that, generally speaking, the date on which the Tax becomes payable would be at least several months after the date of death. To be precise, this is normally within three months of the date of inheritance i.e. the date of assent or transfer. The consequences of this in the majority of cases is that no longer is the Tax payable before the Grant issues with the result of less delay in awaiting an assessed Inaland Revenue Affidavit (Form CA24), agreeing values etc. and arranging finance to discharge the liability pending sale of assets. One now simply requests the Revenue to "note" the completed I.R.A. containing details of the assets and liabilities and this, duly marked, is then presented to the Probate Office together with the other relevant documents — Will, Oath of Executor etc. — to enable the Grant to issue withour undue delay. Following the issue of the Grant, this will be noted in the usual way thus putting the assets of the Estate into the name or control of the Executor who should then be in a position to discharge the Funeral Expenses, Debts and other Testamentary Expenses in the first instance. When these have been discharged, or at least quantified, the Executor is then in a position to contemplate dis- tributions in favour of the beneficiaries at which point the implications of Capital Acquisitions Tax have to be care- fully considered. Generally speaking, not only has the due date for the payment of the Tax changed, the incidence has also in that the beneficiary is liable for the Tax and is primarily accountable therefor — the Executor is in fact a secondary accountable person. Notwithstanding this, Executors are well advised to take steps to ensure that the

Tax is paid to the point of lodging appropriate Forms IT 3 with the Capital Taxes Branch of the Revenue and in certain cases withholding the amount of the Tax from funds to be handed over to beneficiaries. Having regard to the fact that C.A.T. is a cumulative Tax, it is appropriate to suggest that the Form IT3 be signed by the beneficiary particularly in the context that the Form contains statements regarding previous gifts etc. received by the beneficiary from the Testator which fact has, of course, a direct bearing on the rate of Tax applicable. Arising from their preliminary examination prior to marking the Affidavit, the Revenue are entitled where they consider it appropriate to request a payment on account of the Tax at that point i.e. before the issue of the Grant of Probate. This they would do in cases particularly where the Executor and/or the Beneficiary are resident outside the jurisdiction. This is an extreme example but it should be noted from the wording of Section 60 (3) that the Revenue have powers to demand payment of Tax in certain situations as would particularly be the case where an "external" dimension arises i.e. Executor, Beneficiary or property is not within the jurisdiction. Regarding the actual payment of the Tax, considera- tion should be given to the manner in which payment might be made in certain instances for example by the surrender at par of Government securities standing at a discount — this is a carry forward from the old Estate Duty legislation but relates only to taxable inheritances - and by the instalments as provided for in Section 43 of the Act. This essentially arises in relation to property and while it does not provide any relief in interest terms, it does assist cash flow in the context that Tax can be spread out and paid over five years, the first instalment falling due one year subsequent to valuation date. Finally, in relation to the discharge of the Tax liability, the Executor is obliged to advise the Revenue of any signi- ficant changes in the composition of the Estate by lodging a Corrective Account on Form B3 and further the Execu- tor must take care ultimately to ensure that appropriate Certificates of Discharge from C.A.T. are available. All such Certificates are conditional and are generally issued on the basis of the "facts disclosed" which means that the Revenue can subsequently reopen the case as they would, of course, do in the event of new facts coming to light. Nevertheless, particularly in the matter of determining values etc., the Certificates of Discharge can have relevance. It should be noted, however, that notwith- standing previously accepted values, a sale of property within three years and agricultural land within six years of death will normally reopen the valuation question and could consequently give rise to an additional Tax liability. From the brief reference earlier to Capital Transfer Tax, it will be appreciated that a liability to this Tax will arise in relation to Irish Estates where the value of U.K. assets is in excess of £25,000 and these assets are bequeathed other than to the surviving spouse. In relation to the extraction of a Grant of Probate in England in the first instance, details of the U.K. assets must be submitted on Inland Revenue Account Form 201 for assessment of C.T.T. This Tax is payable on assessment of this Form as was the case in relation to Estate Duty. Hence, the system is different when com- pared with the Irish system for payment of C.A.T.

48