The Gazette 1989

GAZETTE

APRIL 1989

Taxing the voluntary disposition inter vivos

In the halcyon days of Estate Duty a voluntary disposition by a healthy disponer, who looked a good prospect to survive five years f r om the date of the disposition, presented f ew fiscal problems for either the practitioner or his client. St amp Duty at 1% on the market value of the property transferred was the norm, wi th the occasional 'belt and braces' approach by some practitioners of insuring against the contingent Estate Duty liability should the disponer die wi th in the five year period.

voluntary disposition at the rates applicable to the "conveyance or transfer on sale" head of charge. This head of charge is divided in two parts; the first part deals with the transfer of stocks or marketable securities and the second part deals with a transfer of any other property. This second part concerns in the main the transfer of immovable property. It also covers the transfer of movable property (apart from stocks or marketable securities dealt with in the first part) in any case where such movable pro- perty is transferred by way of an instrument, that is, any written document. Stamp Duty is not the only fiscal consequence of the voluntary disposition or, to use the colloquial expression, 'the gift'. The gift may give rise to both Capital Acquisitions Tax and Capital Gains Tax con- currently. These tax liabilities are quite likely to be much greater than the initial Stamp Duty charge and concern both Transferor and Transferee. 2. Capital Acquisitions Tax: Under Section 5 Capital Ac- quisitions Tax Act 1976, a gift

disposition' have been defined judicially. In Att. Gen. -v- Smyth [1905] 2 I.R. Palles C. B. said "the meaning of 'voluntary disposition' is definitely and by J O HN F. QU I N L AN B.L., Dip.E.L., A.I.T.I., Tax Consultant conclusively settled by the decision of the Court of Appeal in England in Att. Gen. -v- Jacobs-Smith [1895] 2 Q.B. This decision involves this, that 'voluntary disposition' means a disposition which operates by way of gift." Lord Blanesburgh in A. G. for Ontario -v- Perry [1934] A. C. 477 states "a gift does not cease to be a gift although there is some consideration for it received by the donor: a gift, it has been said, may be something which is not 'a pure and simple gift'." It appears therefore that if a disposition can be shown to contain some element of bounty it is a voluntary dis- position and can be said to operate by way of gift. In other words, any disposition of property which is not a disposition for full considera- tion in money or money's worth is a voluntary dis- position. Stamp Duty is charged on the market value of the property the subject of such

Nowadays, as we know, the game has changed dramatically and the fiscal exposure is much greater. Furthermore, the prac- titioner is in general acting for a more exacting client, who wants to know precisely what tax liability will follow his act of bounty. This article attempts to outline the scope of the problem facing the practitioner in these circum- stances. 1. Chronologically, Stamp Duty is the first fiscal charge. The relevant legislation is Section 74 Finance (1909-10) Act, 1910. Sub Section 1 states that any conveyance or transfer which operates as a voluntary disposition inter vivos is charged to Stamp Duty as if it was a conveyance or transfer on sale, with the substitution in each case of the value of the property conveyed or trans- ferred for the amount or value of the consideration for the sale. Sub Section 5 states that any conveyance or transfer shall, for the purposes of the section, be deemed to be a conveyance or transfer operating as a voluntary dis- position inter vivos, where the Revenue Commissioners are of opinion that by reason of the inadequacy of the sum paid as consideration, the conveyance or transfer confers a sub- stantial benefit on the person to whom the property is conveyed or transferred. The words 'voluntary

A 4 John F. Quinlan.

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