PART V

Capital Acquisitions Tax

Chapter I

Discretionary Trusts

102. —In this Part—

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

“chargeable date”, in relation to any year, means the 5th day of April in that year;

“chargeable discretionary trust” means a discretionary trust in relation to which—

(a) the disponer is dead, and

(b) none of the principal objects of the trust, if any, is under the age of 25 years;

“object” and “principal objects”, in relation to a discretionary trust, have the meanings respectively assigned to them by section 104 of the Finance Act, 1984 .

103. —(1) Where, in any year commencing with the year 1986, under or in consequence of any disposition, property is subject to a chargeable discretionary trust on the chargeable date, the trust shall be deemed on each such date to become beneficially entitled in possession to an absolute interest in that property, and to take on each such date 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 each such chargeable date shall be the date of such inheritance.

(2) (a) Where—

(i) under or in consequence of any disposition, property was subject to a discretionary trust prior to a chargeable date,

(ii) that property is not on that chargeable date subject to that discretionary trust (being on that date a chargeable discretionary trust) because such property is on that date property to which for the time being a person is beneficially entitled for an interest in possession, and

(iii) on that chargeable date that property is property which is limited to become subject again to that chargeable discretionary trust, or will do so by the exercise of a power of revocation,

that property shall be deemed to be subject to that chargeable discretionary trust on that chargeable date if that interest in possession is an interest which is revocable or which is limited to cease on an event other than—

(I) the death of that person, or

(II) the expiration of a specified period, where that interest is taken by that person under a power of appointment contained in that disposition and is, at the time of the appointment thereof, an interest for a period certain of five years or more.

(b) In this subsection, “property” includes property representing such property.

(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) This section shall not apply or have effect in relation to property which is subject to a chargeable discretionary trust on a chargeable date if that property or property representing that property is subject to a charge for tax arising under or in consequence of the same disposition by reason of the provisions of section 106 of the Finance Act, 1984 , on that same date or within the year prior to that date.

104. —In relation to a charge for tax arising by reason of the provisions of section 103 —

(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) (i) subject to the provisions of subparagraph (ii), the valuation date of the taxable inheritance shall be the relevant chargeable date;

(ii) where—

(I) a charge for tax arises on a particular date by reason of the provisions of section 106 of the Finance Act, 1984 , giving rise to a taxable inheritance (in this subparagraph called the first taxable inheritance),

(II) on a later date, a charge for tax arises under or in consequence of the same disposition by reason of the provisions of section 103 giving rise to a taxable inheritance (in this subparagraph called the second taxable inheritance) comprising the same property or property representing that property, and

(III) the valuation date of the first taxable inheritance is a date after the chargeable date of the second taxable inheritance,

the valuation date of the second taxable inheritance shall be the same date as the valuation date of the first taxable inheritance;

(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—

(i) 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;

(ii) notwithstanding the provisions of the Principal Act, make an assessment of such amount of tax as, to the best of his knowledge, information and belief, ought to be charged, levied and paid on that valuation date; and

(iii) pay the amount of such tax to the Accountant-General of the Commissioners;

(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 21, subsection (1) of section 35, subsections (2), (3), (4) and (5) of section 36 and sections 40, 43, 45 and 57 of, and the Second Schedule to, the Principal Act shall not apply.

105. — Section 103 shall not apply or have effect in relation to a discretionary trust referred to in section 108 of the Finance Act, 1984 , or in respect of the property or the inheritance referred to in section 65 of the Finance Act, 1985 .

106. —The tax chargeable on the taxable value of a taxable inheritance which is charged to tax by reason of the provisions of section 103 shall be computed at the rate of one per cent. of such taxable value.

107. —(1) Where—

(a) under or in consequence of any disposition, a charge for tax arises by reason of the provisions of section 103 on a chargeable date (in this section called the first chargeable date),

(b) an accountable person has furnished all the information necessary to enable the Commissioners to ascertain the market value of—

(i) real property, or

(ii) shares which are not dealt in on a stock exchange,

comprised in the taxable inheritance so taken on the valuation date of that taxable inheritance,

(c) pursuant to an application in writing to the Commissioners on that behalf, the market value of such property on that valuation date is agreed on between that person and the Commissioners,

(d) under or in consequence of the same disposition, a charge for tax arises by reason of the provisions of section 103 on either or both of the two chargeable dates in the years next following the year in which the first chargeable date occurs (in this section called the subsequent chargeable dates), and

(e) the same property at subparagraph (i) or (ii) of paragraph (b) is comprised in the taxable inheritances so taken on the subsequent chargeable dates,

the value so agreed on shall be treated for the purposes of this Part as the market value of such property on that valuation date and on the valuation dates of the taxable inheritances so taken on the subsequent chargeable dates.

(2) Notwithstanding the provisions of subsection (1), the market value so agreed shall not be binding—

(a) in any case where there is failure to disclose material facts in relation to any part of the property comprised in the taxable inheritances taken on the first chargeable date or on the subsequent chargeable dates, or

(b) where, at any time after the first chargeable date and before the third of those chargeable dates—

(i) in the case of real property, there is any alteration in the tenure under which the property is held or let, or

(ii) in the case of shares, there is any alteration in the capital or the ownership of the capital of the company concerned or of the rights of the shareholders interse, or

(c) where, at any time after the first chargeable date and before the third of those chargeable dates—

(i) in the case of real property, there is any change whatever, whether affecting that or any other property, which would materially increase or decrease the market value over and above any increase or decrease which might normally be expected if such a change had not occurred, or

(ii) in the case of shares, there has been any material change in the assets of the company or in their market value over and above any such change which might normally be expected,

and in such cases the market value of the real property, or of the shares, may be ascertained again by the Commissioners for each of the relevant valuation dates:

Provided that, in the case of any change referred to in paragraph (c), the market value may be ascertained again by the Commissioners only at the request of the person primarily accountable for the payment of the tax arising by reason of the provisions of section 103 on that relevant valuation date.

(3) Any agreement made under this section shall be binding only on the persons who as such are accountable for the payment of the tax arising by reason of the provisions of section 103 on the first chargeable date and on the subsequent chargeable dates.

108. —Any person who contravenes or fails to comply with any requirement under paragraph (e) of section 104 shall be liable to a penalty of—

(a) £1,000, or

(b) twice the amount of tax payable in respect of the taxable inheritance to which the return relates,

whichever is the lesser.