The Gazette 1989

GAZETTE

APRIL 1989

on any rights reserved to the Transferor. Rights reserved to persons other than the Transferor would not be a good deduction for Stamp Duty purposes. For Gift Tax purposes rights reserved by the Transferor for himself would be a valid deduction in taxing the Donee, as also would rights reserved to persons other than the Transferor. Such rights given to persons other than the Transferor would constitute benefits taken by them from the Transferor for Gift Tax purposes. In relation to Capital Gains Tax, the position is not as clear cut regarding allowing rights reserved by the Transferor for himself or for others in arriving at the chargeable gain. Section 33 Capital Gains Tax Act 1975 deals with transfers where the person disposing and the person acquiring are connected persons as defined". Sub Section 5 of that section allows a de- duction from the market value of the property in respect of any right or res- triction enforceable by the Transferor or by any person connected with him. However, a proviso to the sub section states that certain types of rights are not deductible. As regards rights reserved by the Trans- feror for himself, regard must be had to the pro- visions of Section 8 (1)(b) Capital Gains Tax Act 1975, which deals with part dis- posal. There is a part disposal of an asset where, on a person making a dis- posal, any description of property derived from the asset remains undisposed of. In the case of a gift therefore, with some interest reserved to the Transferor, the gain will only be related to the interest given away. However, if the gift results in a gift in settle- ment, as referred to in Section 15 (2) of the Act, any gain will be related to the whole asset settled.

(v) Does the Transferor wish to reserve a Power of Revocation to himself? The Transferor may have very good social reasons for retaining such a power. The . fiscal implications should be explained fully to him. Reference should be made: (a) As regards Stamp Duty, to Section 34 (5) Finance Act 1978. (b) As regards Capital Ac- quisitions Tax, to Sections 30 and 31 Capital Acquisi- tions Tax Act 1976. (c) As regards Capital Gains Tax, to Section 33 (5) and Section 45 (4) Capital Gains Tax Act 1975. (vi) Has the Transferor received any gifts from any Disponer within three years of the present gift? This is very relevant in the light of the anti-avoidance provisions of Section 8 Capital Acquisitions Tax Act 1976. (vii) Keeping in mind that Capital Gains Tax is refer- rable to a particular tax year, it will be necessary to ascertain if the Transferor had disposed or intends to dispose of any other pro- perty during that particular tax year. The question of allowable losses will also need to be looked at. (ii) The age of the Trans- feree may be relevant for Gift Tax purposes, for example, the minor child of a deceased child of the Transferor would be entitled to a class threshold of £150,000 and not £20,000. (iii) For Gift Tax purposes it is essential that full parti- culars of any other benefits taken by the Transferee from any persons since 2nd June, 1982 should be as- certained. The presence of such benefits can have a profound effect on the tax liability of the current benefit. (C) Regarding the Transferee (Donee) (i) The consanguinity be- tween the Transferee and the Transferor has already been dealt with at B(i).

(iv) In the case of agricul- tural property it will be necessary, in order to ascer- tain whether the Transferee is a "farmer" within the meaning of Section 19 Capital Acquisitions Tax 1976, to obtain particulars, including the value, of all the assets held by the Transferee at the date of the transfer. (v) Is any consideration moving f rom the Transferee? For Stamp Duty purposes, inadequate consideration is ignored and Duty is charged on the market value of the property being transferred (Section 74 (5) Finance (1909/10) Act, 1910). Where the property being transferred is subject to a mortgage which is being taken over by the Trans- feree, the practice of the Revenue Commissioners, it is understood, is to charge Stamp Duty on the equity of redemption only. This practice is probably based on the fact that the equity of redemption was all that the Transferor had to give away. The Revenue Com- missioners may also charge Stamp Duty on the basis of a sale made in considera- tion of the amount of the mortgage if this resulted in more duty (Section 57 Stamp Act 1891). For Gift Tax purposes, partial consideration, as al- ready stated, is allowable as a deduction in arriving at the taxable value of the gift (Section 18 (2) Capital Ac- quisitions Tax Act 1976). The consideration must move from the Transferee but not necessarily to the Transferor. In Capital Gains Tax, the legislation appears to make a distinction between the word "gift" and a trans- action which is not a bargajn made at arm's length. The word "gift" appears to mean a transfer of an asset where the Trans- feror receives no considera- tion, while a transfer which is not a bargain made at

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