The Gazette 1991

GAZETTE

DECEMBER 1991

An option whether over land or not, is an item of property separate from the underlying property (George Wimpey -v- IRC (1975) 2 All ER 45) - it is not a contract for sale of any equitable estate or interest in property under S. 59 Stamp Act, 1891. A voluntary disposition can arise where, for example, a parent transfers the right to exercise a favourable option to a child or where an enforceable option is granted to a child, for a nominal consideration, to purchase property, at present worth (say) £500,000, at a future date for £200,000. Similarly, on the exercise of the option, a written notice exercising the option may constitute an agreement for sale of an equitable interest in property stampable under Section 59, Stamp Act, 1891. If so, it or the instrument giving effect to the transfer, is stampable. Again, if a gift or voluntary disposition is hidden in the exercise of the option, it must be brought to the notice of the Revenue Commissioners in an appropriate statement. This may arise where, on the exercise of the option, the transferor agrees to take consideration less than the option price. For stamp duty purposes, the statement is required. For CAT purposes, the market value is required and a return (if necessary) must be submitted. The signed copy letter of accept- ance of a proposed mortgage may be, now, a stampable document even if the mortgage is never taken up. Probate For probate purposes, valuations have often been depressed. Probate should not, in itself, give rise to stamp duty problems, although an appropriation under Section 55 Succession Act, 1965 could bear stamp duty unless the will gives the authority for the appropriation. It is, however, a serious problem for CAT purposes. In addition, a low probate value will have serious capital gains tax problems on any future disposal.

The exposure under the stamp duty provisions is far greater for the professional than under the CAT provisions. A professional under the stamp duty provisions will be liable qua professional, and, possibly, under the provisions of section 94, whereas under the CAT provisions he can only be liable qua accountable person unless he falls within the provisions of section 94. It may be convenient at this stage to list some of the areas where professionals must consider the provisions of both sets of legislation and the effect that legislation may have if they fail to identify or notify dutiable or taxable situations. Situations Associated companies Transfers of property between associated companies carry a liability for stamp duty at 2% (provided they fulfil the conditions) and in addition there may be some element of gift (or inheritance) passing by reason of the transfer between associated companies. Historically many associated companies would transfer properties at historical value or at book value. This can still take place provided the real or market value is notified to the Revenue Commissioners in a statement to accompany the instrument. In this event, there is no material difference for stamp duty purposes in submitting the market value in the instrument or in the statement. It may have for other purposes and that has to be borne in mind, for example, balancing charges etc. The same consideration applies to CAT. Grant/Exercise of option Normally, for stamp duty purposes stamp duty will be payable on the consideration for the grant. If that grant conceals a voluntary dis- position, the surcharge provisions of both stamp duty and CAT must be borne in mind and an appro- priate statement must accompany the instrument of grant.

Even if the value is uplifted, for CAT purposes, at the valuation date, the low date of death value has the problems for capital gains tax (Section 15 CGTA, 1975) already referred to. If the probate value is low, giving rise to a subsequent capital gains tax liability, that liability is not a credit against the CAT liability arising on the death. They are referable to different "events". Connected persons Very often, as with associated companies, transactions take place between connected persons at book value or written down value or at reduced value. This must now be brought to the attention of the Revenue Commissioners in a statement for stamp duty purposes and, if necessary, a return made with true market value included for CAT purposes. The same con- siderations as apply to associated companies are involved here. Voluntary dispositions All voluntary dispositions give rise to stamp duty and CAT considera- tions and, as for associated companies, if the "value" in the instrument is below the market value, this must be brought to the attention of the Revenue Com- missioners for both taxes. A CAT return is required and a statement for stamp duty purposes. Failure to do this may leave the parties liable to the surcharges and other penalties. The donor is also liable to stamp duty and the solicitor advising him must ensure his protection in the event of under valuation. The solicitor must also be able to obtain some form of comfort in relation to the stamp duty from the donee or ultimately from the Revenue Commissioners. The question must now arise as to some form of certificate of pay- ment of stamp duties, particularly, for trustees, personal repre- sentatives, etc. The adjudication stamp is only a comfort for a purchaser. The accountable parties, 4 09