PART 5

Provisions Relating to Gifts and Inheritances

31. —Where a person becomes beneficially entitled in possession to any benefit—

(a) under a discretionary trust, other than a discretionary trust referred to in paragraph (b), otherwise than for full consideration in money or money's worth paid by the person, that person is deemed to have taken a gift,

(b) under a discretionary trust created—

(i) by will at any time,

(ii) by a disposition, where the date of the disposition is on or after 1 April 1975 and within 2 years prior to the death of the disponer, or

(iii) by a disposition inter vivos and limited to come into operation on a death occurring before, on or after the passing of this Act,

otherwise than for full consideration in money or money's worth paid by the person, that person is deemed to have taken an inheritance.

32. —(1) In subsection (2), “benefit” includes the benefit of the cesser of a liability referred to in section 37 .

(2) Where a benefit, to which a person (in this section referred to as the remainderman) is entitled under a disposition, devolves, or is disposed of, either in whole or in part, before it has become an interest in possession so that, at the time when the benefit comes into possession, it is taken, either in whole or in part, by a person (in this section referred to as the transferee) other than the remainderman to whom it was limited by the disposition, then tax is payable, in respect of a gift or inheritance, as the case may be, of the remainderman in all respects as if, at that time, the remainderman had become beneficially entitled in possession to the full extent of the benefit limited to that remainderman under the disposition, and the transferee is the person primarily accountable for the payment of tax to the extent that the benefit is taken by that transferee.

(3) Subsection (2) shall not prejudice any charge for tax in respect of any gift or inheritance affecting the same property or any part of it under any other disposition.

33. —(1) In this section, “event” includes—

(a) a death, and

(b) the expiration of a specified period.

(2) Where an interest in property, which is limited by the disposition creating it to cease on an event, has come to an end (whether by another disposition, the taking of successive interests into one ownership, or by any means whatever other than the happening of another event on which the interest was limited by the first-mentioned disposition to cease) before the happening of such event, tax is payable under the first-mentioned disposition in all respects as if the event on which the interest was limited to cease under that disposition had happened immediately before the coming to an end of the interest.

(3) Subsection (2) shall not prejudice any charge for tax in respect of any gift or inheritance affecting the same property or any part of it under any disposition other than that first mentioned in subsection (2).

(4) Notwithstanding anything contained in subsection (3), if—

(a) an interest in property which was limited to cease on an event was limited to the disponer by the disposition creating that interest, and

(b) on the coming to an end of that interest, subsection (2) has effect in relation to a gift or inheritance which was taken by a donee or successor under that disposition and which consists of the property in which that interest subsisted, then—

a further gift or inheritance taken by the same donee or successor under another disposition made by the same disponer (being the disposition by which that interest has come to an end) is not a taxable gift or a taxable inheritance in so far as it consists of the whole or any part of the same property.

34. —(1) In this section, “event” has the same meaning as it has in section 33 (1).

(2) Where any donee or successor takes a gift or an inheritance under a disposition made by such donee or successor then, if at the date of such disposition such donee or successor was entitled to the property comprised in the disposition, either expectantly on the happening of an event, or subject to a liability within the meaning of section 28 (9), and such event happens or such liability ceases during the continuance of the disposition, tax is charged on the taxable value of the taxable gift or taxable inheritance which such donee or successor would have taken on the happening of such event, or on the cesser of such liability, if no such disposition had been made.

(3) Subsection (2) shall not prejudice any charge for tax in respect of any gift or inheritance affecting the same property or any part of it under the disposition referred to in that subsection,

35. —(1) Where a person, having a limited interest in possession in property (in this section referred to as the first-mentioned interest), takes a further interest (in this section referred to as the second-mentioned interest) in the same property, as a taxable gift or a taxable inheritance, in consequence of which that person becomes the absolute owner of the property, the taxable value of the taxable gift or taxable inheritance of the second-mentioned interest at the valuation date is reduced by the value at that date of the first-mentioned interest, taking such value to be the value, ascertained in accordance with the Rules contained in Schedule 1, of a limited interest which—

(a) is a limited interest in a capital sum equal to the value of the property,

(b) commences on that date, and

(c) is to continue for the unexpired balance of the term of the first-mentioned interest.

(2) For the purposes of subsection (1)(a), “value” means such amount as would be the incumbrance-free value, within the meaning of section 28 (1), if the limited interest were taken, at the date referred to in subsection (1), as a taxable gift or taxable inheritance.

(3) This section shall not apply where the second-mentioned interest is taken under the disposition under which the first-mentioned interest was created.

36. —(1) Where, by virtue of or in consequence of the exercise of, or the failure to exercise, or the release of, a general power of appointment by any person having such a power, a person becomes beneficially entitled in possession to any benefit, then, for the purposes of this Act, the disposition is the exercise of, or the failure to exercise, or the release of, the power and not the disposition under which the power was created, and the person exercising, or failing to exercise, or releasing, the power is the disponer.

(2) Where, by virtue of or in consequence of the exercise of, or the failure to exercise, or the release of, a special power of appointment by any person having such a power, a person becomes beneficially entitled in possession to any benefit, then, for the purposes of this Act, the disposition is the disposition under which the power was created and the person who created the power is the disponer.

37. —(1) In this section, “appropriate part” has the meaning assigned to it by section 5 (5).

(2) The benefit of the cesser of—

(a) a liability within the meaning of section 28 (9), or

(b) any liability similar to that referred to in paragraph (a) to which the taking of a benefit which was a gift or inheritance was subject,

is deemed to be a gift or an inheritance, as the case may be, which is deemed—

(i) to the extent that the liability is charged on or secured by any property at the time of its cesser, to consist of the whole or the appropriate part, as the case may be, of that property, and

(ii) to the extent that the liability is not charged on or secured by any property at the time of its cesser, to consist of such sum as would, under section 5 (2)(b), be the sum the annual income of which would be equal to the annual value of the liability.

(3) For the purposes of sections 6(1)(c), 6(2)(d), 11(1)(b) and 11(2)(c), the sum referred to in subparagraph (ii) of subsection (2) is deemed not to be situate in the State at the date of the gift or at the date of the inheritance.

38. —(1) In subsection (4), “company” means a private company within the meaning of section 27 .

(2) In this section, “property” does not include any property to which a donee or successor became beneficially entitled in possession prior to 28 February 1969.

(3) Where the taking by any person of a beneficial interest in any property (in this section referred to as additional property) under any disposition made by a disponer has the effect of increasing the value of any other property (in this section referred to as original property) to which that person is beneficially entitled in possession, and which had been derived from the same disponer, the following provisions shall apply—

(a) the increase in value so effected is deemed to be a gift or an inheritance, as the case may be, arising under that disposition and taken by that person, as donee or successor, from that disponer, at the time that donee or successor took the beneficial interest in the additional property,

(b) the original property is treated as having been increased in value if the market value of that property at the time referred to in paragraph (a) would be greater if it was sold as part of an aggregate of the original property and the additional property rather than as a single item of property, and the increase in value for the purposes of this section is the amount by which the market value of the original property if sold at that time as part of such aggregate would be greater than the amount of the market value of that property if sold at that time as a single item of property,

(c) the additional property is, for the purpose of determining its market value, deemed to be part of an aggregate of the original property and the additional property, and

(d) the market value of any property which is to be valued as part of an aggregate of property is ascertained as being so much of the market value of such aggregate as may reasonably be ascribed to that part.

(4) For the purpose of this section, the donee or successor is deemed to be beneficially entitled in possession to any property not-withstanding that within 5 years prior to such a disposition as is referred to in subsection (3) that donee or successor has divested such donee or successor of such property, or any part of such property, otherwise than for full consideration in money or money's worth or has disposed of it to a company of which such donee or successor is, at any time within that period of 5 years, deemed to have control within the meaning of section 27 (4)(b).

39. —Where, under any disposition, a person becomes beneficially entitled in possession to any benefit and, under the terms of the disposition, the disponer has reserved to such disponer the power to revoke the benefit, such person is, for the purposes of this Act, deemed not to be beneficially entitled in possession to the benefit unless and until the power of revocation is released by the disponer, or otherwise ceases to be exercisable.

40. —(1) In subsections (2) and (4), “relevant period”, in relation to any use, occupation or enjoyment of property, means the period of 12 months ending on 31 December in each year.

(2) A person is deemed to take a gift in each relevant period during the whole or part of which that person is allowed to have the use, occupation or enjoyment of any property (to which property that person is not beneficially entitled in possession) otherwise than for full consideration in money or money's worth.

(3) A gift referred to in subsection (2) is deemed to consist of a sum equal to the difference between the amount of any consideration in money or money's worth, given by the person referred to in subsection (2) for such use, occupation or enjoyment, and the best price obtainable in the open market for such use, occupation or enjoyment.

(4) A gift referred to in subsection (2) is treated as being taken at the end of the relevant period or, if earlier, immediately prior to the time when the use, occupation or enjoyment referred to in subsection (2) comes to an end.

(5) In any case where the use, occupation or enjoyment of property is allowed to a person, not being beneficially entitled in possession to that property, under a disposition—

(a) made by will,

(b) where the date of the disposition is on or after 1 April 1975 and within 2 years prior to the death of the disponer, or

(c) which is a disposition inter vivos and the use, occupation or enjoyment is had by that person after the cesser of another person's life interest,

subsections (2), (3) and (4) shall apply in relation to that property as if a reference to an inheritance were substituted for the reference to a gift wherever it occurs in those subsections, and for the purpose of this subsection “relevant period” in subsections (2) and (4), in relation to the use, occupation or enjoyment of property, means the period of 12 months ending on 31 December in any year.

(6) For the purposes of sections 6(1)(c), 6(2)(d), 11(1)(b) and 11(2)(c), the sum referred to in subsection (3) is deemed not to be situate in the State at the date of the gift or at the date of the inheritance.

41. —(1) For the purposes of this Act, an interest in a policy of assurance on human life is deemed to become an interest in possession when either—

(a) the policy matures, or

(b) prior to the maturing of the policy, the policy is surrendered to the insurer for a consideration in money or money's worth, but if during the currency of the policy the insurer makes a payment of money or money's worth, in full or partial discharge of the policy, the interest is deemed to have come into possession to the extent of such payment.

(2) This section has effect in relation to a contract for a deferred annuity, and for the purposes of this section such a contract is deemed to mature on the date when the first instalment of the annuity is due.

42. —(1) If, on the death of a testator and by virtue of section 98 of the Succession Act 1965 , or otherwise, a disposition takes effect as if a person, who had predeceased the testator, had survived the testator, the benefit taken by the estate of that person is not deemed to be an inheritance.

(2) Where a person survives a testator, and—

(a) such person becomes beneficially entitled, under a disposition made by a person who predeceased the testator, to any benefit in relation to any property devised or bequeathed by the testator, and

(b) section 33 of the Wills Act 1837, or section 98 of the Succession Act 1965 , or any analogous provision of the law of another territory has effect in relation to the devise or bequest,

such person is deemed for the purposes of inheritance tax to derive the benefit from the testator, as disponer.

43. —(1) In this section—

“company” means a private company within the meaning of section 27 ;

“market value” means—

(a) in the case of a person's beneficial interest in shares and entitlements, the market value of that interest on the date of the payment, disposition, gift or inheritance, as the case may be, ascertained by reference to the market value on that date of the shares and entitlements in which the interest subsists, and

(b) in the case of a share in which a beneficial interest subsists, the market value of that share ascertained in the manner described in section 27 as if, on the date on which the market value is to be ascertained, it formed an apportioned part of the market value of a group of shares consisting of all the shares in the company issued and outstanding at that date;

“share” has the same meaning as it has in section 27 ;

“specified amount”, in relation to a person's beneficial interest in shares and entitlements, means—

(a) in the case of consideration paid, or a disposition made, by the company, a nil amount or, if greater, the amount by which the market value of the beneficial interest was decreased as a result of the payment of the consideration or the making of the disposition, and

(b) in the case of consideration, or a gift, or an inheritance taken by the company, a nil amount or, if greater, the amount by which the market value of the beneficial interest was increased as a result of the taking of the consideration, gift or inheritance.

(2) For the purposes of this Act—

(a) consideration paid by, or a disposition made by, a company is deemed to be consideration, or a disposition, as the case may be, paid or made, and

(b) consideration, or a gift, or an inheritance taken by a company is deemed to be consideration, or a gift or an inheritance, as the case may be, taken,

by the beneficial owners of the shares in the company and the beneficial owners of the entitlements under any liability incurred by the company (otherwise than for the purposes of the business of the company, wholly and exclusively) in the same proportions as the specified amounts relating to their respective beneficial interests in the shares and entitlements bear to each other.

(3) For the purposes of subsection (2) all acts, omissions and receipts of the company are deemed to be those of the beneficial owners of the shares and entitlements, referred to in subsection (2), in the company, in the proportions mentioned in that subsection.

(4) Where the beneficial owner of any shares in a company or of any entitlement of the kind referred to in subsection (2), is itself a company, the beneficial owners of the shares and entitlements, referred to in subsection (2), in the latter company, are deemed to be the beneficial owners of the latter company's shares and entitlements in the former company, in the proportions in which they are the beneficial owners of the shares and entitlements in the latter company.

(5) So far as the shares and entitlements referred to in subsection (2) are held in trust and have no ascertainable beneficial owners, consideration paid, or a disposition made, by the company are deemed to be paid or made by the disponer who made the disposition under which the shares and entitlements are so held in trust.

44. —(1) In this section—

“arrangement” means an arrangement which is made on or after 25 January 1989, and includes—

(a) any act or omission by a person or by the trustees of a disposition,

(b) any act or omission by any person having an interest in shares in a company,

(c) the passing by any company of a resolution, or

(d) any combination of acts, omissions or resolutions referred to in paragraphs (a), (b) and (c);

“company” means a private company within the meaning of section 27 ;

“event” includes—

(a) a death, and

(b) the expiration of a specified period;

“related shares” means the shares in a company, the market value of which shares is increased by any arrangement;

“related trust” has the meaning assigned to it by subsections (3) and (5);

“specified amount” means an amount equal to the difference between—

(a) the market value of shares in a company immediately before an arrangement is made, and ascertained under section 27 as if each share were a share in a company controlled at that time by the disponer concerned and that share was the absolute property of that disponer at that time, and

(b) the market value of those shares, or of property representing those shares, immediately after the arrangement is made, and ascertained under section 26 ,

and such specified amount is deemed to be situate where the company is incorporated.

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

(3) Where—

(a) a person has an absolute interest in possession in shares in a company, and

(b) any arrangement results in the market value of those shares, or of property representing those shares, immediately after that arrangement is made, being less than it would be but for that arrangement,

then, tax is payable in all respects as if a specified amount which relates to that arrangement were a benefit taken, immediately after that arrangement is made, from that person, as disponer, by—

(i) the beneficial owners of the related shares in that company, and

(ii) so far as the related shares in that company are held in trust (in this section referred to as the “related trust”) and have no ascertainable beneficial owners, by the disponer in relation to that related trust as if, immediately after that arrangement is made, that disponer was the absolute beneficial owner of those related shares,

in the same proportions as the market value of the related shares, which are beneficially owned by them or are deemed to be so beneficially owned, is increased by that arrangement.

(4) Where—

(a) an interest in property is limited by the disposition creating it to cease on an event,

(b) immediately before the making of an arrangement to which paragraph (c) relates, the property includes shares in a company, and

(c) the arrangement results in the market value of those shares, or of property representing those shares, immediately after that arrangement is made, being less than it would be but for that arrangement,

then, tax is payable under that disposition in all respects—

(i) where the interest in property is an interest in possession, as if such property included a specified amount which relates to that arrangement,

(ii) where the interest in property is not an interest in possession, as if it were an interest in possession and such property included a specified amount which relates to that arrangement, and

(iii) as if the event on which the interest was limited to cease under that disposition had happened, to the extent of the specified amount, immediately before that arrangement is made.

(5) Where—

(a) shares in a company are, immediately before the making of an arrangement to which paragraph (b) relates, subject to a discretionary trust under or in consequence of any disposition, and

(b) the arrangement results in those shares, or property representing those shares, remaining subject to that discretionary trust but, immediately after that arrangement is made, the market value of those shares, or of property representing those shares, is less than it would be but for that arrangement,

then, tax shall be payable under that disposition in all respects as if a specified amount, which relates to that arrangement, were a benefit taken immediately after that arrangement is made—

(i) by the beneficial owners of the related shares in that company, and

(ii) so far as the related shares in that company are held in trust (in this section referred to as the “related trust”) and have no ascertainable beneficial owners, by the disponer in relation to that related trust as if, immediately after that arrangement is made, that disponer was the absolute beneficial owner of those related shares,

in the same proportions as the market value of the related shares, which are beneficially owned by them or are deemed to be so beneficially owned, is increased by that arrangement.

(6) Subsections (3), (4) and (5) shall not prejudice any charge for tax in respect of any gift or inheritance taken under any disposition on or after the making of an arrangement referred to in those subsections and comprising shares in a company, or property representing such shares.

(7) Where shares in a company, which are held in trust under a disposition made by any disponer, are related shares by reason of any arrangement referred to in this section, any gift or inheritance taken under the disposition on or after the arrangement is made and comprising those related shares, or property representing those related shares, are deemed to be taken from that disponer.

(8) In relation to the tax due and payable in respect of any gift or inheritance taken under paragraph (ii) of subsection (3) or paragraph (ii) of subsection (5), and notwithstanding any other provision of this Act—

(a) the disponer in relation to the related trust is not a person primarily accountable for the payment of such tax, and

(b) a person who is a trustee of the related trust concerned for the time being at the date of the gift or at the date of the inheritance, or at any date subsequent to that date, is so primarily accountable.

(9) A person who is accountable for the payment of tax in respect of any specified amount, or part of a specified amount, taken as a gift or an inheritance under this section shall, for the purpose of paying the tax, or raising the amount of the tax when already paid, have power, whether the related shares are or are not vested in that person, to raise the amount of such tax and any interest and expenses properly paid or incurred by that person in respect of such tax, by the sale or mortgage of, or a terminable charge on, the related shares in the relevant company.

(10) Tax due and payable in respect of a taxable gift or a taxable inheritance taken under this section shall be and remain a charge on the related shares in the relevant company.

(11) Where related shares are subject to a discretionary trust immediately after an arrangement is made in accordance with the provisions of this section, the amount by which the market value of such shares is increased by such arrangement is property for the purposes of a charge for tax arising by reason of section 15 .

(12) Where, immediately after and as a result of an arrangement, shares in a company have been redeemed, the redeemed shares are, for the purpose of the references to property representing shares in subsection (1) and subsection (3), (4) or (5), except a reference in relation to which the redeemed shares are actually represented by property, deemed, immediately after the arrangement, being an arrangement made on or after 6 May 1993, to be represented by property, and the market value of the property so deemed to represent the redeemed shares is deemed to be nil.