The Gazette 1991

GAZETTE

DECEMBER 1991

Capital Acquisitions Tax On the other hand, section 79 Finance Act, 1989 imposes a surcharge. Where the estimate of the market value (the "estimated market value") of any asset comprised in a gift or inheritance and included in a self-assessment return, when expressed as a percentage of the value ultimately ascertained ( " t he ascertained value") is within any of the follow- ing percentages, the surcharge indicated is payable: (a) The estimated market value is equal to or greater than 0% but less than 40% of the ascertained value 30% (b) The estimated market value is equal to or greater than 40% but less than 50% of the ascertained value 2 0% (c) The estimated market value is equal to or greater than 50% but less than 67% of the ascertained value 10% (d) The estimated market value is equal to or greater than 67% of the ascertained value Nil% Chronologically, section 79 Finance Act, 1989 introduced the idea of a surcharge for undervaluations of property. It is a necessary ingredient in the concept of self- assessment and although its impact and philosophy in capital acquisition tax is similar to that applying in stamp duty, the net effect is not as harsh. In both cases, the surcharge appears to be mandatory although there are powers of remission in both codes, which may apply to surcharges. This means that unless a case to remit is presented to the Revenue the surcharges wi ll automatically apply. Stamp duty appears to differ from the capital acquisitions tax provision in the following ways: Surcharge as % of Tax

under this section the following could result: (a) The client could be liable under the surcharge provisions of section 103 for anything between 50% and 200% of the duty together with the penalty provisions of section 97. (b) The solicitor, under Section 97 could be liable for £1,000 and 100% of the difference in the duty. This latter penalty could also apply to any other person concerned in or about the pre- paration of the instrument (valuers, brokers, bankers) including the taxpayer and these penalties would be cumulative: Ascertained value £200,000; Submitted value £150,000 Surcharge: 50% Rate of stamp duty 3% CAT and Secondary Liability On the other hand, the capital acquisitions tax provisions of section 79 are confined solely to the accountable person. However, an "accountable person" is defined in the Principal Act as a person who is primarily accountable and a person who is secondarily accountable (which would include a solicitor in certain circum- stances). That of itself does not make the solicitor, qua solicitor, liable for the CAT surcharge although it may make him liable as solicitor qua accountable person. However, under section 94 Finance Act, 1983 (Revenue Offences) any person who knowingly aids, abets, assists, incites or induces another person to make or deliver, knowingly or wilfully, an incorrect return, statement or account, in connection with any tax (which includes CAT and stamp duty) will be liable to a penalty under that section. Client: Stamp duty Surcharge £6,000 £3,000 £1,000 £1,500 £1,000 £1,500 £14,000 Penalty Difference Solicitor: Penalty Difference

(a) There is no minimum difference applicable to CAT. Unless the difference exceeds £5,000 for stamp duty, no surcharge arises at the lowest penalty rate. (b) The differences are looked at from different perspectives in both taxes but they both provide the same answer: For example Submitted value on £150,000; Ascertained value £200,000 For stamp duty purposes, the difference is 25% of the ascertained value. For CAT purposes, the submitted value as a % of the ascertained value is 75%. Consequently there would be a penalty for stamp duty but none for CAT. For this reason it must not be assumed that because a surcharge is avoided for CAT purposes, that it is automatically avoided for stamp duty purposes. Similarly, because of the £5,000 " f l oo r" for stamp duty purposes, it cannot be assumed that the avoidance of a stamp duty charge on that ground, avoids a surcharge for CAT. Stamp Duty and Nagligence Provisions Section 103 is complicated by the provisions of Section 97 of the Finance Act, 1991 which provides that where all the circumstances affecting a transaction cannot be set out in the instrument, they must be set out in a statement to accompany the instrument. Any person interested in or concerned in or about the making of that instrument (or statement) and who is guilty of any fraud or negligence (negligence is a new provision) will be liable to a penalty of £1,000 together with the difference (or in the case of fraud, twice the difference) between the stamp duty that should be payable and the stamp duty that would have been payable on the submitted facts.

For example, if through some negligence a solicitor is in default

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