The Gazette 1989

SEPTEMBER 1989

GAZETTE.

Contd. from page 325. qualify under the more favourable terms of Section 26 and might not qualify under the new Paragraph 9. 5. Conclusion The "Favourite Nephew Relief" is a Very significant one and can result in an elimination of, or significant reduction in, a liability to Gift or Inheritance Tax. A similar relief is available from Capital Gains Tax. The broad interpretation of the old Paragraph 9 in the case of A.E. -v- The Revenue Commissioners has been curtailed by Section 83 FA 1989 and a nephew must now spend a minimum amount of hours per week in the business before he will qualify as a favourite nephew. At the same time as limiting the relief, Section 83 has extended it to include certain life settlements and rights of residence. These changes take effect from 1st May 1989. Practitioners should now review cases in which clients may qualify for the relief, as the new paragraph 9 offers considerable opportunities for tax planning in respect of both Gift and Inheritance Tax. Notes:- 1 . The terms "uncle" and "nephew" are used throughout this Article for convenience and include "aunt" and "niece". 2. The new Paragraph 9 (2) states: "For the purpose of computing the tax payable on a gift or inheritance the donee or successor shall be deemed to bear to the disponer the relationship of a child in any case where the donee or successor is a child of a brother or a child of a sister of the disponer and either (a) The donee or successor has worked substantially on a full-time basis for the disponer for the relevant period in carrying on, or in assisting in carrying on, the trade, business or profession of the disponer and the gift of inheritance consists of property which was used in connection with that business, trade or profession; or (b) The donee or successor has worked substantially on a full-time basis for a company for the relevant period in carrying on or in assisting in carrying on the trade, business or profession of the company and the gift or inheritance consists of shares in that company". 3. Paragraph 9, as originally drafted, stated: "In any case where: (a) The donee or successor is a nephew or niece of the disponer who has worked substantially on a full-time basis for the period of five years ending on the date of the gift or the date of the inheritance in carrying on or assisting in the carrying on of the trade, business, or profession or the work of or connected with the office or employment of the disponer; and (b) The gift or inheritance consists of property "which was used in connection with such trade, business, profession or employment or of shares in a company owning such property, then for the purpose of computing the tax payable on the gift or inheritance the donee or successor shall be deemed to bear to the disponer the relationship of a child". For a discussion see 'CAT-On Favourite Nephew Relief' Gazette 79 IL Si 91, April 1985.

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4 . A.E. -v- The Revenue Commissioners [1984] I.L.R.M. 301.

5. Ibid at p. 305. 6 . Ibid at p. 304. 7 . (1884) 27 Ch.D. 8 . [19841 I.L.R.M. 301 at p. 304. 9 . Ibid at p. 304. 1 0 . [1984] I.L.R.M. 303.

1 1 . Circuit Court - Unreported - June 1988 - Sheridan J. 1 2 . Appeal Commissioners - Unreported - January 1989.

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