Chapter 2

Initial levy on discretionary trusts

14. —In this Chapter—

“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.

15. —(1) Where, on or after 25 January 1984, under or in consequence of any disposition, property becomes subject to a discretionary trust, the trust is 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—

(i) under the age of 25 years, where the property became subject to the trust on or after 25 January 1984 and before 31 January 1993, or

(ii) under the age of 21 years, where the property becomes or became subject to the trust on or after 31 January 1993,

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 of that property 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 this 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 25 January 1984 is, for the purposes of subsection (1), deemed to have become subject to the trust on that date.

(3) Property which, under or in consequence of any disposition, was subject to a discretionary trust on 31 January 1993 is, for the purposes of subsection (1), deemed to have become subject to the trust on that date.

(4) For the purposes of this section—

(a) an interest in expectancy is not 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 on human life is not property until, and then only to the extent that, the interest becomes an interest in possession under section 41 or is represented by property which is not an interest in expectancy.

(5) Where, apart from this subsection, property or property representing such property would be chargeable under this section, or under this section and the corresponding provisions of the repealed enactments, with tax more than once under the same disposition, such property is so chargeable with tax once only, that is, on the earliest occasion on which such property would become so chargeable with tax.

16. —In relation to a charge for tax arising by reason of section 15 —

(a) a reference in section 27 to a company controlled by the successor and the definition in that section of “group of shares” is construed as if (for the purpose of that reference) the list of persons contained in subsection (3) of that section and (for the purpose of that definition) the list of persons contained in that definition included the following, that is, the trustees of the discretionary trust, the living objects of the discretionary trust, the relatives of those objects, nominees of those trustees or of those objects or of the relatives of those objects, and the trustees of a settlement whose objects include the living objects of the discretionary trust or relatives of those living objects.

(b) section 30 shall apply, with the modification that the valuation date of the taxable inheritance is—

(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 to that date is 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 is also 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 that person or for that person's benefit, and this Act shall apply, in its application to that charge for tax, as if that object of the discretionary trust were a person referred to in section 45 (2); and

(e) section 45 (1), sections 50, 56 and 81 and Schedule 2 shall not apply.

17. —(1) Section 15 shall not apply 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 (1) of section 783 of the Taxes Consolidation Act 1997 or a trust scheme or part of a trust scheme approved by the Commissioners under that section or section 785 of that Act, but shall not include a scheme or arrangement which relates to matters other than service in particular offices or employments;

(c) for the purposes of a registered unit trust scheme within the meaning of the Unit Trusts Act 1990 ;

(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 that individual or those individuals' affairs;

or

(e) for the purpose of providing for the upkeep of a house or garden referred to in section 77 (6).

(2) Section 15 shall not apply—

(a) in relation to a discretionary trust in respect of the property subject to or becoming subject to the trust which, on the termination of the trust, is comprised in a gift or an inheritance taken by the State, or

(b) in respect of an inheritance which, apart from this subsection, would be deemed, by the combined effect of section 15 and section 40 , to be taken by a discretionary trust.

18. —(1) In this section—

“earlier relevant inheritance” means a relevant inheritance deemed to be taken on the date of death of the disponer;

“later relevant inheritance” means a relevant inheritance which, after the date of death of the disponer, is deemed to be taken by a discretionary trust by virtue of there ceasing to be a principal object of that trust who is under the age of 21 years;

“relevant inheritance” means an inheritance which, by virtue of section 15 (1), is deemed to be taken by a discretionary trust;

“relevant period” means—

(a) in relation to an earlier relevant inheritance, the period of 5 years commencing on the date of death of the disponer,

(b) in relation to a settled relevant inheritance, the period of 5 years commencing on the date of death of the life tenant concerned, and

(c) in relation to a later relevant inheritance, the period of 5 years commencing on the latest date on which a later relevant inheritance was deemed to be taken from the disponer;

“settled relevant inheritance” means a relevant inheritance taken on the death of a life tenant;

“the appropriate trust”, in relation to a relevant inheritance, means the trust by which that inheritance was deemed to be taken.

(2) Subject to subsection (3), the tax chargeable on the taxable value of a taxable inheritance which is charged to tax by reason of section 15 is computed at the rate of 6 per cent of such taxable value.

(3) Where, in the case of each earlier relevant inheritance, each settled relevant inheritance or each later relevant inheritance, as the case may be, taken from the same disponer, one or more objects of the appropriate trust became beneficially entitled in possession before the expiration of the relevant period to an absolute interest in the entire of the property of which that inheritance consisted on and at all times after the date of that inheritance (other than property which ceased to be subject to the terms of the appropriate trust by virtue of a sale or exchange of an absolute interest in that property for full consideration in money or money's worth), then, in relation to all such earlier relevant inheritances, all such settled relevant inheritances or all such later relevant inheritances, as the case may be, the tax so chargeable is computed at the rate of 3 per cent.

(4) Where 2 or more persons are together beneficially entitled in possession to an absolute interest in property, those persons shall not, by reason only that together they are beneficially so entitled in possession, be regarded for the purposes of subsection (3) as beneficially so entitled in possession.

(5) Notwithstanding section 57 , interest shall not be payable on any repayment of tax which arises by virtue of subsection (3).