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8 1976

CAPITAL ACQUISITIONS TAX ACT, 1976

PART IV

Value Of Property For Tax

Market value of property.

15. —(1) Subject to the provisions of this Act, the market value of any property for the purposes of this Act shall be estimated to be the price which, in the opinion of the Commissioners, such property would fetch if sold in the open market on the date on which the property is to be valued in such manner and subject to such conditions as might reasonably be calculated to obtain for the vendor the best price for the property.

(2) In estimating the market value of any property, the Commissioners shall not make any reduction in the estimate on account of the estimate being made on the assumption that the whole property is to be placed on the market at one and the same time.

(3) The market value of any property shall be ascertained by the Commissioners in such manner and by such means as they think fit, and they may authorise a person to inspect any property and report to them the value thereof for the purposes of this Act, and the person having the custody or possession of that property shall permit the person so authorised to inspect it at such reasonable times as the Commissioners consider necessary.

(4) Where the Commissioners require a valuation to be made by a person named by them, the costs of such valuation shall be defrayed by the Commissioners.

(5) Subject to the provisions of this Act, in estimating the price which unquoted shares or securities might be expected to fetch if sold in the open market, it shall be assumed that in that market there is available to any prospective purchaser of the shares or securities all the information which a prudent prospective purchaser might reasonably require if he were proposing to purchase them from a willing vendor by private treaty and at arm's length.

(6) In subsection (5), “unquoted shares or securities” means shares or securities which are not dealt in on a stock exchange.

Market value of certain shares in private trading companies.

16. —(1) The market value of each share in a private trading company which (after the taking of the gift or of the inheritance) is, on the date of the gift or on the date of the inheritance, a company controlled by the donee or the successor, shall be ascertained by the Commissioners, for the purposes of tax, as if it formed part of a group of shares sufficient in number to give the owner of the group control of the company.

(2) In this section—

nominee” includes a person who may be required to exercise his voting power on the directions of, or who holds shares directly or indirectly on behalf of, another person;

private company” means a body corporate (wherever incorporated)—

(a) in which the number of shareholders (excluding employees who are not directors of the company and any shareholder who is such as nominee of a beneficial owner of shares) is not more than fifty;

(b) which has not issued any of its shares as a result of a public invitation to subscribe for shares; and

(c) which is under the control of not more than five persons;

private trading company” means a private company which is not a private non-trading company within the meaning of section 17.

(3) In this section, a reference to a company controlled by the donee or successor is a reference to a company that is under the control of any one or more of the following, that is to say, the donee or successor, the relatives of the donee or successor, nominees of the donee or successor, nominees of relatives of the donee or successor, and the trustees of a settlement whose objects include the donee or successor or relatives of the donee or successor; and for the purposes of this section, a company which is so controlled by the donee or successor shall be regarded as being itself a relative of the donee or successor.

(4) For the purposes of this section—

(a) a company shall be deemed to be under the control of not more than five persons if any five or fewer persons together exercise, or are able to exercise, or are entitled to acquire, control, whether direct or indirect, of the company; and for this purpose—

(i) persons who are relatives of any other person together with that other person;

(ii) persons who are nominees of any other person together with that other person;

(iii) persons in partnership; and

(iv) persons interested in any shares or obligations of the company which are subject to any trust or are part of the estate of a deceased person,

shall respectively be treated as a single person; and

(b) a person shall be deemed to have control of a company at any time if—

(i) he then had control of the powers of voting on all questions, or on any particular question, affecting the company as a whole, which, if exercised, would have yielded a majority of the votes capable of being exercised thereon, or could then have obtained such control by an exercise at that time of a power exercisable by him or at his direction or with his consent;

(ii) he then had the capacity, or could then by an exercise of a power exercisable by him or at his direction or with his consent obtain the capacity, to exercise or to control the exercise of any of the following powers, that is to say—

(I) the powers of a board of directors of the company;

(II) powers of a governing director of the company;

(III) power to nominate a majority of the directors of the company or a governing director thereof;

(IV) the power to veto the appointment of a director of the company, or

(V) powers of a like nature;

(iii) he then had a right to receive, or the receipt of, more than one-half of the total amount of the dividends of the company, whether declared or not, and for the purposes of this subparagraph, “dividend” shall be deemed to include interest on any debentures of the company; or

(iv) he then had an interest in the shares of the company of an aggregate nominal value representing one-half or more of the aggregate nominal value of the shares of the company.

Market value of certain shares in private non-trading companies.

17. —(1) The market value of each share in a private non-trading company which (after the taking of the gift or of the inheritance) is, on the date of the gift or on the date of the inheritance, a company controlled by the donee or the successor, shall for the purposes of this Act, be such sum as would have been payable in respect of the share to the owner thereof if the company had been voluntarily wound up and all the assets realised on the date at which the share is to be valued.

(2) In this section—

investment income”, in relation to a private company, means income which, if the company were an individual, would not be earned income within the meaning of section 2 of the Income Tax Act, 1967 ;

private company” and “company controlled by the donee or the successor” have the meanings assigned to them by section 16;

private non-trading company” means a private company—

(a) whose income (if any) in the twelve months preceding the date at which a share therein is to be valued consisted wholly or mainly of investment income; and

(b) whose property, on the date referred to in paragraph (a), consisted wholly or mainly of property from which investment income is derived.

(3) Where the assets of such a private non-trading company as is referred to in subsection (1) include a share in another such private non-trading company (hereinafter referred to as the latter company), the market value of such share shall be ascertained on the basis that the latter company is voluntarily wound up and its assets realised on the date on which the share is to be valued.

(4) In determining the market value of the share referred to in subsection (1) or (3), no allowance shall be made for the costs of winding up any company or of realising its assets.

(5) In ascertaining, for the purposes of subsection (1) or (3), the amount which the assets of a company would realise, the assets shall be deemed to realise the amount of their market value as at the date at which the share referred to in subsection (1) or (3) is to be valued.

Taxable value of a taxable gift or taxable inheritance.

18. —(1) In this section, “incumbrance-free value”, in relation to a taxable gift or a taxable inheritance, means the market value at the valuation date of the property of which the taxable gift or taxable inheritance consists at that date, after deducting any liabilities, costs and expenses that are properly payable out of the taxable gift or taxable inheritance.

(2) Subject to the provisions of this section (but save as provided in section 19), the taxable value of a taxable gift or a taxable inheritance (where the interest taken by the donee or successor is not a limited interest) shall be ascertained by deducting from the incumbrance-free value thereof the market value of any bona fide consideration in money or money's worth, paid by the donee or successor for the gift or inheritance, including—

(a) any liability of the disponer which the donee or successor undertakes to discharge as his own personal liability; and

(b) any other liability to which the gift or inheritance is subject under the terms of the disposition under which it is taken,

and the amount so ascertained shall be the taxable value:

Provided that no deduction shall be made under this subsection in respect of any liability which falls to be deducted in ascertaining the incumbrance-free value.

(3) Where a liability (other than a liability within the meaning of subsection (9)) for which a deduction may be made under the provisions of subsection (1) or (2) falls to be discharged after the time at which it falls to be taken into account as a deduction under either of those subsections, it shall be valued for the purpose of making such a deduction at its current market value at the time at which it falls to be so taken into account.

(4) The taxable value of a taxable gift or a taxable inheritance, where the interest taken by the donee or the successor is a limited interest, shall be ascertained as follows—

(a) the value of the limited interest in a capital sum equal to the incumbrance-free value shall be ascertained in accordance with the Rules contained in the First Schedule; and

(b) from the value ascertained in accordance with paragraph (a) a deduction shall be made in respect of the market value of any bona fide consideration in money or money's worth paid by the donee or the successor for the gift or the inheritance and the amount remaining after such deduction shall be the taxable value:

Provided that no deduction shall be made under this paragraph in respect of any liability which falls to be deducted in ascertaining the incumbrance-free value.

(5) A deduction shall not be made under the provisions of this section—

(a) in respect of any liability the payment of which is contingent on the happening of some future event:

Provided that if the event on the happening of which the liability is contingent happens and the liability is paid, then, on a claim for relief being made to the Commissioners and subject to the other provisions of this section, a deduction shall be made in respect of the liability and such adjustment of tax as is appropriate shall be made; and such adjustment shall be made on the basis that the donee or successor had taken an interest in possession in the amount which falls to be deducted for the liability, for a period certain which was equal to the actual duration of the postponement of the payment of the liability;

(b) in respect of any liability, costs or expenses in so far as the donee or successor has a right of reimbursement from any source, unless such reimbursement cannot be obtained;

(c) in respect of any liability created by the donee or successor or any person claiming in right of the donee or successor or on his behalf;

(d) in respect of tax, interest or penalties chargeable under this Act in respect of the gift or inheritance, or of the costs, expenses or interest incurred in raising or paying the same;

(e) in respect of any liability in so far as such liability is an incumbrance on, or was created or incurred in acquiring, any property which is comprised in any gift or inheritance and which is exempt from tax under any provision of this Act or otherwise;

(f) in the case of any gift or inheritance referred to in section 6 (1) (c) or section 12 (1) (b) in respect of—

(i) any liability, costs or expenses due to a person resident outside the State (save in so far as such liability is required by contract to be paid in the State or is charged on the property which is situate in the State and which is comprised in the gift or inheritance); or

(ii) any liability, costs or expenses in so far as the same are charged on or secured by property which is comprised in the gift or inheritance and which is not situate in the State,

save to the extent that all the property situate outside the State and comprised in the gift or inheritance is insufficient for the payment of the liability, costs or expenses;

(g) for any tax in respect of which a credit is allowed under the provisions of section 66 or 67.

(6) In the case of a gift or inheritance referred to in subsection (5) (f), any deduction to be made under subsection (2) or (4) (b) shall be restricted to the proportion of the consideration which bears the same proportion to the whole of the consideration as the taxable gift or taxable inheritance bears to the whole of the gift or the whole of the inheritance.

(7) A deduction shall not be made under the provisions of this section—

(a) more than once for the same liability, costs, expenses or consideration, in respect of all gifts and inheritances taken by the donee or successor from the disponer; or

(b) for any liability, costs, expenses or consideration, a proportion of which falls to be allowed under the provisions of section 19 (2) (ii) or (iii) in respect of a gift or inheritance taken by the donee or successor from the disponer.

(8) Where a taxable gift or a taxable inheritance is subject to a liability within the meaning of subsection (9), the deduction to be made in respect thereof under this section shall be an amount equal to the market value of the whole or the appropriate part, as the case may be, of the property, within the meaning of section 5 (5).

(9) For the purpose of subsection (8), “liability”, in relation to a taxable gift or a taxable inheritance, means a liability which deprives the donee or successor, whether permanently or temporarily, of the use, enjoyment or income in whole or in part of the property, or of any part of the property, of which the taxable gift or taxable inheritance consists.

(10) Where—

(a) bona fide consideration in money or money's worth has been paid by a person for the granting to him, by a disposition, of an interest in expectancy in property; and

(b) at the coming into possession of the interest in expectancy, that person takes a gift or an inheritance of that property under that disposition,

the deduction to be made under subsection (2) or (4) (b) for consideration paid by that person shall be a sum equal to the same proportion of the taxable value of the taxable gift or taxable inheritance (as if no deduction had been made for such consideration) as the amount of the consideration so paid bore to the market value of the interest in expectancy at the date of the payment of the consideration.

(11) Any deduction, under the provisions of this section, in respect of a liability which is an incumbrance on any property shall so far as possible be made against that property.

Value of agricultural property.

19. —(1) In this section—

agricultural property” means agricultural land, pasture and woodland situate in the State and crops, trees and underwood growing on such land and also includes such farm buildings, farm houses and mansion houses (together with the lands occupied therewith) as are of a character appropriate to the property;

agricultural value” means the market value of agricultural property reduced by 50 per cent. of that value, or by a sum of £100,000, whichever is the lesser;

farmer”, in relation to a donee or successor, means an individual who is domiciled and ordinarily resident in the State and in respect of whom not less than 75 per cent. of the market value of the property to which he is beneficially entitled in possession is represented by the market value of property in the State which consists of agricultural property, livestock, bloodstock and farm machinery, and, for the purposes of this definition, no deduction shall be made from the market value of property for any debts or incumbrances.

(2) Save as provided in subsection (7), in so far as any gift or inheritance consists of agricultural property—

(a) at the date of the gift or at the date of the inheritance; and

(b) at the valuation date,

and is taken by a donee or successor who is, on the valuation date and after taking the gift or inheritance, a farmer, the provisions of section 18 (other than subsection 7 (b) thereof) shall apply in relation to agricultural property as they apply in relation to other property subject to the following modifications—

(i) in subsection (1) of that section, the reference to market value shall be construed as a reference to agricultural value;

(ii) where a deduction is to be made for any liability, costs or expenses, in accordance with subsection (1) of that section, only a proportion of such liability, costs or expenses shall be deducted and that proportion shall be the proportion that the agricultural value of the agricultural property bears to the market value of that property; and

(iii) where a deduction is to be made for any consideration under subsection (2) or (4) (b) of that section, only a proportion of such consideration shall be deducted and that proportion shall be the proportion that the agricultural value of the agricultural property bears to the market value of that property.

(3) Where a taxable gift or a taxable inheritance is taken by a donee or successor subject to the condition that the whole or part thereof will be invested in agricultural property and such condition is complied with within two years after the date of the gift or the date of the inheritance, then the gift or inheritance shall be deemed, for the purposes of this section, to have consisted—

(a) at the date of the gift or at the date of the inheritance; and

(b) at the valuation date,

of agricultural property to the extent to which the gift or inheritance is subject to such condition and has been so invested.

(4) In relation to the deduction, in respect of agricultural property, of 50 per cent. of its market value, or £100,000, whichever is the lesser, the total amount deductible in ascertaining the agricultural value shall not exceed £100,000, in respect of the aggregate of—

(a) all taxable gifts taken on or after the 28th day of February, 1969; and

(b) all taxable inheritances taken on or after the 1st day of April, 1975,

which consist in whole or in part of agricultural property, taken by the same person, as donee or successor, from the same disponer.

(5) (a) The agricultural value shall cease to be applicable to real property which is agricultural property if and to the extent that the property—

(i) is sold or compulsorily acquired within the period of six years after the date of the gift or the date of the inheritance; and

(ii) is not replaced, within a year of the sale or compulsory acquisition, by other agricultural property,

and tax shall be chargeable in respect of the gift or inheritance as if the property were not agricultural property :

Provided that this paragraph shall not have effect where the donee or successor dies before the property is sold or compulsorily acquired.

(b) If an arrangement is made, in the administration of property subject to a disposition, for the appropriation of property in or towards the satisfaction of a benefit under the disposition, such arrangement shall be deemed not to be a sale or a compulsory acquisition for the purposes of paragraph (a).

(6) For the purposes of subsection (2), if, in the administration of property subject to a disposition, property is appropriated in or towards the satisfaction of a benefit in respect of which a person is deemed to take a gift or an inheritance under the disposition, the property so appropriated, if it was subject to the disposition at the date of the gift or at the date of the inheritance, shall be deemed to have been comprised in that gift or inheritance at the date of the gift or at the date of the inheritance.

(7) The provisions of subsection (2) shall have effect in relation to agricultural property which consists of trees or underwood as if the words “and is taken by a donee or successor who is, on the valuation date and after taking the gift or inheritance, a farmer,” were omitted therefrom.

(8) In this section, other than in subsection (4), any reference to a donee or successor shall include a reference to the transferee referred to in section 23 (1).

Contingencies affecting gifts or inheritances.

20. —Where, under a disposition, a person becomes beneficially entitled in possession to any benefit and, under the terms of the disposition, the entitlement, or any part thereof, may cease upon the happening of a contingency (other than the revocation of the entitlement upon the exercise by the disponer of such a power as is referred to in section 30), the taxable value of any taxable gift or taxable inheritance taken by that person on becoming so entitled to that benefit shall be ascertained as if no part of the entitlement were so to cease; but, in the event and to the extent that the entitlement so ceases, the tax payable by that person shall, to that extent, be adjusted (if, by so doing, a lesser amount of tax would be payable by him) on the basis that he had taken an interest in possession for a period certain which was equal to the actual duration of his beneficial entitlement in possession :

Provided that nothing in this section shall prejudice any charge for tax on the taking by such person of a substituted gift or inheritance on the happening of such a contingency.

Valuation date for tax purposes.

21. —(1) Subject to the provisions of subsection (7), the valuation date of a taxable gift shall be the date of the gift.

(2) The valuation date of a taxable inheritance shall be the date of death of the deceased person on whose death the inheritance is taken if the successor or any person in right of the successor or on his behalf takes the inheritance—

(a) as a donatio mortis causa; or

(b) by reason of the failure to exercise a power of revocation.

(3) If a gift becomes an inheritance by reason of its being taken under a disposition where the date of the disposition is within two years prior to the death of the disponer, the valuation date thereof shall be determined as if it were a gift.

(4) The valuation date of a taxable inheritance, other than a taxable inheritance referred to in subsection (2) or (3), shall be the earliest date of the following—

(a) the earliest date on which a personal representative or trustee or the successor or any other person is entitled to retain the subject matter of the inheritance for the benefit of the successor or of any person in right of the successor or on his behalf;

(b) the date on which the subject matter of the inheritance is so retained; or

(c) the date of delivery, payment or other satisfaction or discharge of the subject matter of the inheritance to the successor or for his benefit or to or for the benefit of any person in right of the successor or on his behalf.

(5) If any part of a taxable inheritance referred to in subsection (4) may be retained, or is retained, delivered, paid or otherwise satisfied, whether by way of part payment, advancement, payment on account or in any manner whatsoever, before any other part or parts of such inheritance, the appropriate valuation date for each part of the inheritance shall be determined in accordance with that subsection as if each such part respectively were a separate inheritance.

(6) The Commissioners may give to an accountable person a notice in writing of the date determined by them to be the valuation date in respect of the whole or any part of an inheritance, and, subject to any decision on appeal pursuant to subsection (9), the date so determined shall be deemed to be the valuation date.

(7) If a taxable inheritance referred to in subsection (4) or (5) is disposed of, ceases or comes to an end before the valuation date referred to in those subsections in such circumstances as to give rise to a taxable gift, the valuation date in respect of such taxable gift shall be the same date as the valuation date of the taxable inheritance.

(8) Notwithstanding anything contained in this section, the Commissioners may, in case of doubt, with the agreement in writing of the accountable person or his agent, determine the valuation date of the whole or any part of any taxable inheritance and the valuation date so determined shall be substituted for the valuation date which would otherwise be applicable by virtue of this section.

(9) An appeal shall lie against any determination made by the Commissioners under subsection (6) and the provisions of section 52 shall apply, with any necessary modifications, in relation to an appeal under this subsection as they apply in relation to an appeal against an assessment of tax.