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9 1984

FINANCE ACT, 1984

PART V

Capital Acquisitions Tax

Chapter I

Discretionary Trusts

Interpretation (Part V).

104. —In this Part—

the Principal Act” means the Capital Acquisitions Tax Act, 1976 ;

object”, in relation to a discretionary trust, means a person for whose benefit the income or capital, or any part of the income or capital, of the trust property is applied, or may be applied;

principal objects”, in relation to a discretionary trust, means such objects, if any, of the trust for the time being as are—

(a) the spouse of the disponer,

(b) the children of the disponer, or

(c) the children of a child of the disponer where such child predeceased the disponer.

Amendment of section 2 (interpretation) of Principal Act.

105. Section 2 (1) of the Principal Act is hereby amended by the insertion, in the definition of “discretionary trust” after “property is held on trust” of—

“to accumulate the income or part of the income of the property, or any trust whereby, or by virtue or in consequence of which, property (other than property to which for the time being a person is beneficially entitled for an interest in possession) is held on trust”,

and the said definition, as so amended, is set out in the Table to this section.

TABLE

discretionary trust” means any trust whereby, or by virtue or in consequence of which, property is held on trust to accumulate the income or part of the income of the property, or any trust whereby, or by virtue or in consequence of which, property (other than property to which for the time being a person is beneficially entitled for an interest in possession) is held on trust to apply, or with a power to apply, the income or capital or part of the income or capital of the property for the benefit of any person or persons or of any one or more of a number or of a class of persons whether at the discretion of trustees or any other person and notwithstanding that there may be a power to accumulate all or any part of the income;

Acquisitions by discretionary trusts.

106. —(1) Where, on or after the 25th day of January, 1984, under or in consequence of any disposition, property becomes subject to a discretionary trust (which expression has in this Part the meaning assigned to it by the Principal Act as amended by section 105 ) otherwise than for full consideration in money or money's worth paid by the trustees of the trust, the trust shall be deemed, on—

(a) the date on which that property becomes or became subject to the discretionary trust;

(b) the date of death of the disponer; or

(c) where there are principal objects of the trust, the date on which there ceases to be a principal object of the trust who is under the age of 25 years,

whichever date is the latest, to become or to have become beneficially entitled in possession to an absolute interest in so much, if any, of that property or of property representing that property and of accumulations of income thereof or of property representing those accumulations as remains subject to the discretionary trust on that latest date, and to take or to have taken an inheritance accordingly as if the trust, and the trustees as such for the time being of the trust, were together a person for the purposes of the Principal Act, and that latest date shall be the date of the inheritance.

(2) Property which, under or in consequence of any disposition, was subject to a discretionary trust on the 25th day of January, 1984, shall, for the purposes of subsection (1), be deemed to have become subject to the trust on that date.

(3) For the purposes of this section—

(a) an interest in expectancy shall not be property until an event happens whereby the interest ceases to be an interest in expectancy or is represented by property which is not an interest in expectancy;

(b) an interest in a policy of assurance upon human life shall not be property until, and then only to the extent that, the interest becomes an interest in possession under the provisions of section 32 of the Principal Act or is represented by property which is not an interest in expectancy.

(4) Where, apart from this subsection, property or property representing such property would be chargeable under this section with tax more than once under the same disposition, such property shall be so chargeable with tax once only, that is to say, on the earliest occasion on which such property becomes so chargeable with tax.

Application of Principal Act.

107. —In relation to a charge for tax arising by reason of the provisions of section 106

(a) a reference in section 16 of the Principal Act to a company controlled by the successor shall be construed as including a reference to a company that is under the control of any one or more of the following, that is to say, the trustees of the discretionary trust, the living objects of the discretionary trust, the relatives of those objects, and nominees of those trustees or of those objects or of the relatives of those objects;

(b) section 21 of the Principal Act shall apply, with the modification that the valuation date of the taxable inheritance shall be—

(i) the date of the inheritance, or

(ii) the valuation date ascertained in accordance with that section,

whichever is the later, and with any other necessary modifications;

(c) a person who is a trustee of the discretionary trust concerned for the time being at the date of the inheritance or at any date subsequent thereto shall be a person primarily accountable for the payment of the tax;

(d) an object of the discretionary trust concerned to whom or for whose benefit any of the property subject to the trust is applied or appointed shall also be accountable for the payment of tax the charge in respect of which has arisen prior to the date of the application or appointment of the property to him or for his benefit, and the Principal Act shall have effect, in its application to that charge for tax, as if that object of the discretionary trust were a person referred to in section 35 (2) of the Principal Act;

(e) any person who is primarily accountable for the payment of tax by virtue of paragraph (c) shall, within three months after the valuation date or the date of the passing of this Act, whichever is the later, deliver to the Commissioners a full and true return—

(i) of every inheritance in respect of which he is so primarily accountable;

(ii) of all the property comprised in such inheritance; and

(iii) of an estimate of the market value of such property;

(f) the provisions of section 41 of the Principal Act shall have effect, in the application of the Principal Act to any such charge for tax as aforesaid arising before the date of the passing of this Act, as if the references to the valuation date in subsections (1), (2) and (3) of that section were references to the date of the passing of this Act, or to the valuation date, whichever is the later;

and

(g) section 35 (1), subsections (2), (3), (4) and (5) of section 36 and sections 40, 45 and 57 of, and the Second Schedule to, the Principal Act shall not apply.

Exemptions.

108. Section 106 shall not apply or have effect in relation to a discretionary trust which is shown to the satisfaction of the Commissioners to have been created exclusively—

(a) for public or charitable purposes in the State or Northern Ireland;

(b) for the purposes of—

(i) any scheme for the provision of superannuation benefits on retirement established by or under any enactment or by or under an instrument made under any enactment, or

(ii) any sponsored superannuation scheme within the meaning of subsection (9) of section 235 of the Income Tax Act, 1967 , or a trust scheme or part of a trust scheme approved by the Commissioners under that section or section 235A of that Act;

(c) for the purposes of a registered unit trust scheme within the meaning of the Unit Trusts Act, 1972 ;

(d) (i) for the benefit of one or more named individuals, and

(ii) for the reason that such individual, or all such individuals, is or are, because of age or improvidence, or of physical, mental or legal incapacity, incapable of managing his or their affairs; or

(e) for the purpose of providing for the upkeep of a house or garden referred to in section 39 of the Finance Act, 1978 .

Computation of tax.

109. —The tax chargeable on the taxable value of a taxable inheritance which is charged to tax by reason of the provisions of section 106 shall be computed at the rate of three per cent. of such taxable value.