PART IVCapital Transfer Tax
Relief for business and agricultural property and woodlands
73Relief for business property
Schedule 10 to this Act shall have effect for reducing, in the cases mentioned therein,—
(a)the value transferred by a transfer of value ; and
(b)the amount of a distribution payment made, or capital distribution treated as made.
74Relief for agricultural property
(1)Schedule 8 to the [1975 c. 7.] Finance Act 1975 shall be amended as follows.
(2)In sub-paragraph (1) of paragraph 1, paragraph (a) shall be omitted and for the words " so computed " there shall be substituted the words " computed in accordance with paragraph 2 below ".
(3)In sub-paragraph (2) of paragraph 1, after the words " transfer of value " in paragraph (a) there shall be inserted the words " and either that transfer or the current transfer was or would have been a transfer made on death " and at the end of paragraph (d) there shall be added the words
“and
(e)the agricultural property became, through the earlier transfer, the property of the person or of the spouse of the person who is the transferor in relation to the current transfer.
(2A)Where, by virtue of sub-paragraph (2) above, the conditions stated in paragraph 3 below are deemed to be satisfied but, under the earlier transfer mentioned in that sub-paragraph, the amount of the value transferred which was attributable to the agricultural property was part only of the value of that property, a like part of its agricultural value shall be substituted for the agricultural value of the property in ascertaining the part eligible for relief under paragraph 2 below ”.
(4)In paragraph 2 for the words from " reduced " to the end there shall be substituted the words " reduced by one half ".
(5)After sub-paragraph (b) of paragraph 4 there shall be inserted the following sub-paragraph:
“(bb)where the value of the shares or debentures is taken, by virtue of paragraph 9A of Schedule 10 to this Act, to be less than their value as previously determined, they would have been sufficient, without any other property, to give the transferor control as mentioned in sub-paragraph (b) above ; and”.
(6)At the end of paragraph 5(2) there shall be added
“and
(c)the area of any rough grazing land shall be counted as one-sixth of its actual area.
(2A)The Board may consult the Minister of Agriculture, Fisheries and Food or, as the case may require, the Secretary of State or the Department of Agriculture for Northern Ireland on any question arising; under this paragraph whether any land is rough grazing land; and paragraph 7(4) of Schedule 4 to this Act shall apply in relation to any such question as if it were a question as to the value of the land.”
(7)The preceding provisions of this section have effect as follows:—
(a)subsections (1), (2) and (4) to (6), in relation to chargeable transfers made after 6th April 1976 ; and
(b)subsection (3) in relation to chargeable transfers made after the passing of this Act.
75Relief for woodlands
In Schedule 9 to the [1975 c. 7.] Finance Act 1975, in paragraph 6(2)(b) (expenses allowable under the Schedule to include those incurred in replanting within three years of a disposal) after the word " disposal" there shall be inserted the words " (or such longer time as the Board may allow) ".
Relief for works of art, historic buildings etc.
76Conditionally exempt transfers
(1)Subject to the provisions of this section, a transfer of value made after 6th April 1976 is an exempt transfer to the extent that the value transferred by it is attributable to property—
(a)which, on a claim made for the purpose, is designated by the Treasury under section 77 below; and
(b)with respect to which the requisite undertaking described in that section is given by such person as the Treasury think appropriate in the circumstances of the case.
(2)A transfer of value exempt as aforesaid with respect to any property is hereafter referred to as a conditionally exempt transfer of that property.
(3)Subsection (1) above does not apply to a transfer of value other than one which under section 22 of the [1975 c. 7.] Finance Act 1975 a person makes on his death unless—
(a)the transferor or his spouse, or the transferor and his spouse between them, have been beneficially entitled to the property throughout the six years ending with the transfer; or
(b)the transferor acquired the property on a death and either there was under the said section 22 a transfer of value on the occasion of the death which was itself a conditionally exempt transfer of the property or the value of the property was, under section 31 or 34 of the said Act of 1975, section 40 of the [1930 c. 28.] Finance Act 1930 or section 2 of the [1931 c. 24 (N.I.).] Finance Act (Northern Ireland) 1931 left out of account for the purposes of the capital transfer tax or estate duty chargeable on the death.
(4)Subsection (1) above does not apply to a transfer of value to the extent to which it is an exempt transfer under paragraph 1 or 10 of Schedule 6 to the said Act of 1975 (gifts to spouses or charities).
(5)As from 7th April 1976 the enactments mentioned in Schedule 11 to this Act shall have effect subject to the amendments there specified, being amendments consequential on the provisions of this section and sections 77 to 84 below.
77Designation and undertakings
(1)The Treasury may designate under this section
(a)any pictures, prints, books, manuscripts, works of art, scientific collections or other things not yielding income which appear to the Treasury to be of national, scientific, historic or artistic interest;
(b)any land which in the opinion of the Treasury is of outstanding scenic or historic or scientific interest;
(c)any building for the preservation of which special steps should in the opinion of the Treasury be taken by reason of its outstanding historic or architectural interest;
(d)any land which adjoins such a building as is mentioned in paragraph (c) above and which in the opinion of the Treasury is essential for the protection of the character and amenities of the building ;
(e)any object which in the opinion of the Treasury is historically associated with such a building as is mentioned in paragraph (c) above.
(2)In the case of property within subsection (1)(a) above, the requisite undertaking is that, until the person beneficially entitled to the property dies or the property is disposed of, whether by sale or gift or otherwise—
(a)the property will be kept permanently in the United Kingdom and will not leave it temporarily except for a purpose and a period approved by the Treasury ; and
(b)reasonable steps will be taken for the preservation of the property and for securing reasonable access to the public.
(3)If it appears to the Treasury, on a claim made for the purpose, that any documents which are designated or to be designated under subsection (1)(a) above contain information which for personal or other reasons ought to be treated as confidential, they may exclude those documents, either altogether or to such extent as they think fit, from so much of an undertaking given or to be given under subsection (2)(b) above as relates to public access.
(4)In the case of other property within subsection (1) above, the requisite undertaking is that, until the person beneficially entitled to the property dies or the property is disposed of, whether by sale or gift or otherwise, reasonable steps will be taken—
(a)in the case of land falling within subsection (1)(b) above, for the maintenance of the land and the preservation of its character ; and
(b)in the case of any other property, for the maintenance, repair and preservation of the property and, if it is an object falling with subsection (1)(e) above, for keeping it associated with the building concerned ;
and for securing reasonable access to the public.
(5)In this section " national interest" includes interest within any part of the United Kingdom.
78Chargeable events
(1)Where there has been a conditionally exempt transfer of any property, tax shall be charged under this section on the first occurrence after the transfer of an event which under this section is a chargeable event with respect to the property.
(2)If the Treasury are satisfied that at any time an undertaking given with respect to the property under section 76 above or subsection (5)(b) below has not been observed in a material respect, the failure to observe the undertaking is a chargeable event with respect to the property; and the person liable for the tax chargeable by reference to that event is the person who, if the property were sold at the time the tax becomes chargeable, would be entitled to receive (whether for his benefit or not) the proceeds of sale or any income arising from them.
(3)If—
(a)the person beneficially entitled to the property dies; or
(b)the property is disposed of, whether by sale or gift or otherwise,
the death or disposal is, subject to subsections (4) and (5) below, a chargeable event with respect to the property ; and the person liable for the tax chargeable by reference to the event is, in a case within paragraph (a), the person who, if the property were sold immediately after the death would be entitled to receive (whether for his own benefit or not) the proceeds of sale or any income arising from them and, in a case within paragraph (b), the person for whose benefit the property is disposed of.
(4)A death or disposal is not a chargeable event with respect to any property if the personal representatives of the deceased (or, in the case of settled property, the trustees or the person next entitled) within three years of the death make or, as the case may be, the disposal is—
(a)a disposal of the property by sale by private treaty to a body mentioned in paragraph 12 of Schedule 6 to the [1975 c. 7.] Finance Act 1975 (museums etc.) or a disposal of it to such a body otherwise than by sale ; or
(b)a disposal to the Board in pursuance of paragraph 17 of Schedule 4 to that Act or in accordance with directions given by the Treasury under section 50 or 51 of the [1946 c. 64.] Finance Act 1946 (acceptance of property in satisfaction of tax);
and a death or disposal of the property after such a disposal as is mentioned in paragraph (a) or (b) above is not a chargeable event with respect to the property unless there has again been a conditionally exempt transfer of it after that disposal.
(5)A death or disposal otherwise than by sale is not a chargeable event with respect to any property if—
(a)the transfer of value made on the death or the disposal is itself a conditionally exempt transfer of the property ; or
(b)the undertaking previously given with respect to the property under section 76 above (or any undertaking previously given with respect to the property under this paragraph) is replaced by a corresponding undertaking given by such person as the Treasury think appropriate in the circumstances of the case.
(6)Where tax is chargeable under this section with respect to any property within section 77(1)(c), (d) or (e) above, tax shall also be chargeable with respect to any property associated with it; but the Treasury may direct that the foregoing provisions of this subsection shall not apply if it appears to them that the entity consisting of the building, land and objects concerned has not been materially affected.
(7)For the purposes of subsection (6) above two or more properties are associated with each other if one of them is a building falling within subsection (1)(c) of section 77 above and the other or others such land or objects as, in relation to that building, fall within subsection (1)(d) or (e) of that section.
79Amount of charge under s. 78
(1)Subject to the provisions of this section, tax chargeable in respect of any property under section 78 above by reference to a chargeable event shall be charged—
(a)on an amount equal to the value of the property at the time of the chargeable event; and
(b)at the following rate or rates—
(i)if the relevant transferor is alive, the rate or rates that would be applicable to that amount under the second Table in section 37 of the [1975 c. 7.] Finance Act 1975 if it were the value transferred by a chargeable transfer made by the relevant transferor at that time;
(ii)if the relevant transferor is dead, the rate or rates that would have applied to that amount under the appropriate Table in that section if it had been added to the value transferred on his death and had formed the highest part of that value.
(2)For the purposes of subsection (1)(b)(ii) above the appropriate Table is, if the conditionally exempt transfer by the relevant transferor was made on death, the first Table and, if not, the second.
(3)Where the chargeable event is a disposal on sale and—
(a)the sale was not intended to confer any gratuitous benefit on any person ; and
(b)was either a transaction at arm's length between persons not connected with each other or a transaction such as might be expected to be made at arm's length between persons not connected with each other,
the value of the property at the time of the chargeable event shall be taken for the purposes of subsection (1)(a) above to be equal to the proceeds of the sale.
(4)Where by virtue of section 76(4) above the conditionally exempt transfer extended only to part of the property, the amount mentioned in subsection (1)(a) above shall be proportionately reduced.
(5)The relevant transferor in relation to the tax chargeable on the occasion of a chargeable event in respect of any property is—
(a)if there has been only one conditionally exempt transfer of the property before the event, the person who made that transfer;
(b)if there have been two or more such transfers and the last was before, or only one of them was within, the period of thirty years ending with the event, the person who made the last of those transfers ;
(c)if there have been two or more such transfers within that period, the person who made whichever of those transfers the Board may select.
(6)The conditionally exempt transfers to be taken into account for the purpose of subsection (5) above in relation to a chargeable event do not include transfers made before any previous chargeable event in respect of the same property or before any event which apart from section 78(4) above would have been such a chargeable event.
(7)Where after a conditionally exempt transfer of any property there is a chargeable transfer the value transferred by which is wholly or partly attributable to that property, any tax charged on that value so far as attributable to that property shall be allowed as a credit—
(a)if the chargeable transfer is a chargeable event with respect to the property, against the tax chargeable in accordance with this section by reference to that event;
(b)if the chargeable transfer is not such a chargeable event, against the tax chargeable in accordance with this section by reference to the next chargeable event with respect to the property.
80Reinstatement of transferor's cumulative total
(1)Where tax has become chargeable under section 78 above by reference to a chargeable event in respect of any property (" the relevant event") the rate or rates of tax applicable to any subsequent chargeable transfer made by the person who made the last conditionally exempt transfer of the property before the relevant event shall be determined as if the amount on which tax has become chargeable as aforesaid were value transferred by a chargeable transfer made by him at the time of the relevant event.
(2)Where the person who made the last conditionally exempt transfer of the property before the relevant event—
(a)is dead ; and
(b)is the relevant transferor in relation to a subsequent chargeable event,
section 79(1)(b)(ii) above shall have effect as if the value transferred on his death were increased by the amount on which tax has become chargeable on the occasion of the relevant event.
(3)If—
(a)the person who made the last conditionally exempt transfer of the property before the relevant event is not the relevant transferor in relation to that event; and
(b)at the time of that event or within the previous five years the property is or has been comprised in a settlement made not more than thirty years before that event; and
(c)a person who is the settlor in relation to the settlement has made a conditionally exempt transfer of the property within those thirty years,
subsections (1) and (2) above shall have effect with the substitution for references to the person who made the last conditionally exempt transfer before the relevant event of a reference to any such person as is mentioned in paragraph (c) above.
(4)The conditionally exempt transfers to be taken into account for the purposes of subsection (3)(c) above in relation to the relevant event do not include transfers made before any previous chargeable event in respect of the same property or before any event which apart from section 78(4) above would have been such a chargeable event.
81Conditionally exempt distributions
(1)A transfer of property or other event shall not constitute or give rise to a distribution payment or capital distribution under any provision of Schedule 5 to the [1975 c. 7.] Finance Act 1975 (settled property) other than paragraph 12 if the property by reference to which the amount of the distribution payment or capital distribution would fall to be determined has been comprised in the settlement throughout the six years ending with the transfer or event, and—
(a)the property is, on a claim made for the purpose, designated by the Treasury under section 77 above; and
(b)the requisite undertaking described in that section is given with respect to the property by such person as the Treasury think appropriate in the circumstances of the case.
(2)A transfer or event which by virtue of subsection (1) above does not constitute or give rise to a distribution payment or capital distribution is hereafter referred to as a conditionally exempt distribution of the property in question.
(3)Subject to the following provisions of this section, sections 78, 79 and 80 above shall have effect as if—
(a)references to a conditionally exempt transfer included references to a conditionally exempt distribution;
(b)references to a disposal otherwise than by sale included references to any event on the occurrence of which a capital distribution or distribution payment is treated as made under any provision of the said Schedule 5 other than paragraph 12; and
(c)references to an undertaking given under section 76 above included references to an undertaking given under this section.
(4)Where the relevant transferor for the purposes of section 79 above falls to be determined by reference to a conditionally exempt distribution, paragraph (b) of subsection (1) of that section shall not apply and the rate or rates at which the tax is charged on the amount mentioned in paragraph (a) of that section shall be—
(a)if the settlement is still in existence at the time of the chargeable event, the rate or rates that would be applicable (under paragraph 7 or, as the case may be, paragraph 8 of the said Schedule 5) to that amount if a capital distribution of that amount were made at that time out of the property comprised in the settlement;
(b)if the settlement has then ceased to exist—
(i)subject to sub-paragraph (ii) below, the rate or rates that would be applicable as mentioned in paragraph (a) above but by reference to a capital distribution made on the occasion on which the settlement ceased to exist;
(ii)if a capital distribution was made or treated as made on that occasion, the rate or rates that would have been applicable to that amount if it had been included in the amount of that distribution and had formed the highest part of it.
(5)Where tax has become chargeable as mentioned in section 80 above by reference to a chargeable event (" the relevant event") and the person to whom that section applies falls to be determined by reference to a conditionally exempt distribution, the following provisions shall have effect instead of subsections (1) and (2) of that section—
(a)the rate or rates of tax applicable to any subsequent capital distribution out of the property comprised in the settlement shall be determined as if the amount on which tax has become chargeable had been the amount of a distribution payment made at the time of the relevant event ; and
(b)where the settlement has ceased to exist and the tax chargeable on the occasion of a subsequent chargeable event falls to be calculated in accordance with paragraph (i) or (ii) of subsection (4)(b) above, that paragraph shall have effect as if the amount of the capital distribution mentioned in that paragraph were increased by the amount on which tax has become chargeable on the occasion of the relevant event.
82Exemption from periodic charge
(1)Where property is comprised in a settlement and there has been a conditionally exempt transfer of the property on or before the occasion on which it became comprised in the settlement, paragraph 12 of Schedule 5 to the [1975 c. 7.] Finance Act 1975 (periodic charge to tax where there is no interest in possession) shall not have effect in relation to the property on any relevant date (whether a relevant anniversary or, in a case within sub-paragraph (2) of that paragraph, the end of a year) falling before the first occurrence after the transfer of a chargeable event with respect to the property.
(2)Where property is comprised in a settlement and there has been, on or before the occasion on which it became comprised in the settlement, a disposal of the property in relation to which subsection (4) of section 31 of the [1965 c. 25.] Finance Act 1965 (capital gains tax relief for works of art etc.) had effect, the said paragraph 12 shall not have effect in relation to the property on any relevant date falling before the first occurrence after the disposal of an event on the happening of which the property is treated as sold under subsection (5) of that section.
(3)Where property is comprised in a settlement and there has been no such transfer or disposal of the property as is mentioned in subsection (1) or (2) above on or before the occasion on which it became comprised in the settlement, then, if—
(a)the property has, on a claim made for the purpose, been designated by the Treasury under section 77 above; and
(b)the requisite undertaking described in that section has been given by such person as the Treasury think appropriate in the circumstances of the case,
tax which would otherwise be chargeable under the said paragraph 12 in respect of the property on a relevant date shall be deferred until the first occurrence of an event which, if there had been a conditionally exempt transfer of the property when the claim was made and the undertaking had been given under section 76 above, would be a chargeable event with respect to the property.
(4)Where any deferred tax becomes chargeable on the occurrence of a chargeable event, it shall be charged—
(a)subject to subsection (5) below, on an amount equal to the value of the property at the time of the chargeable event; and
(b)at the rate at which it would be chargeable if the relevant date had fallen at that time.
(5)If more than one relevant date has passed and, accordingly, more than one deferred tax becomes chargeable—
(a)the second deferred tax shall be charged on the value mentioned in subsection (4)(a) above less the amount of the first deferred tax ; and
(b)the third deferred tax (if any) shall be charged on the amount found under paragraph (a) above less the amount of the second deferred tax,
and so on.
(6)In its application to a capital distribution made after the chargeable event, paragraph 13(1) of the said Schedule 5 (tax credit for periodic charge) shall have effect as if the reference to tax charged at a relevant anniversary included a reference to tax deferred from a relevant anniversary and charged under subsection (4) above.
(7)The persons liable for any deferred tax shall be those who would have been liable but for the deferment.
83Transfers on or before 6th April 1976
(1)Section 31 to 34 of the [1975 c. 7.] Finance Act 1975 (conditional exemption for certain objects, land etc. on death) shall not apply to any death after 6th April 1976.
(2)Where tax is chargeable after that date under subsection (3) of section 33 or subsection (8) of section 34 of the said Act of 1975 by reason of a sale, so much of paragraph (b) of that subsection as provides for the value of the object or property to be treated as equal to the proceeds of sale shall not apply unless the sale was—
(a)not intended to confer any gratuitous benefit on any person; and
(b)was either a transaction at arm's length between persons not connected with each other or a transaction such as might be expected to be made at arm's length between persons not connected with each other.
(3)Where there has been a transfer of value in relation to which the value of any property has been left out of account under the provisions of sections 31 to 34 of the said Act of 1975 and, before any tax has become chargeable in respect of that property under those provisions, there is a conditionally exempt transfer of that property, then, on the occurrence of a chargeable event in respect of that property—
(a)if there has been no conditionally exempt transfer of the property on death, tax shall be chargeable either under section 78 above or under those provisions as the Board may elect; and
(b)if there has been such a conditionally exempt transfer, tax shall be chargeable under that section and not under those provisions.
(4)In sections 79(7) and 82 above references to a conditionally exempt transfer of any property include references to a transfer of value in relation to which the value of any property has been left out of account under the provisions of the said sections 31 to 34 and, in relation to such property, references to a chargeable event or to the tax chargeable in accordance with section 79 above by reference to a chargeable event include references to an event on the occurrence of which tax becomes chargeable under those provisions or to the tax so chargeable.
(5)In paragraph 19(1)(c) of Schedule 4 to the [1975 c. 7.] Finance Act 1975 (interest on unpaid tax) after " section 32 " there shall be inserted " or 34 ".
(6)In its application to a sale on any date after 6th April 1976 which does not satisfy the requirements of subsection (2)(a) and (b) above, subsection (2) of section 40 of the [1930 c. 28.] Finance Act 1930 shall have effect as if the reference to the proceeds of sale were a reference to the value of the objects on that date.
(7)Subsections (3) and (4) above shall apply to a death in relation to which the value of any property has been left out of account under the said section 40 as they apply to such a transfer of value as is there mentioned, taking references to tax becoming chargeable under the provisions there mentioned as references to estate duty becoming chargeable under that section or section 48 of the Finance Act 1950.
(8)In determining for the purposes of subsection (2) of the said secti[1950 c. 15.] on 40 what is the last death on which the objects passed there shall be disregarded any death after 6th April 1976.
(9)In the application of this section to Northern Ireland for references to section 40 of the [1930 c. 28.] Finance Act 1930 and section 48 of the [1950 c. 15.] Finance Act 1950 there shall be substituted references to section 2 of the [1931 c. 24 (N.I.).] Finance Act (Northern Ireland) 1931 and Article 6 of the [1972/1100 (N.I.).] Finance (Northern Ireland) Order 1972 respectively.
84Maintenance funds for historic buildings
(1)Subject to the provisions of Part II of Schedule 6 to the [1975 c. 7.] Finance Act 1975 as applied by this section, a transfer of value made after 2nd May 1976 is an exempt transfer to the extent that—
(a)the value transferred by it is attributable to property which becomes comprised in a settlement; and
(b)the Treasury so direct (whether before or after the time of the transfer);
and paragraphs 6 to 12 of Schedule 5 to that Act shall not apply in relation to property comprised in a settlement by virtue of a transfer of value exempt under this section.
(2)The Treasury shall, on a claim made for the purpose, give a direction under subsection (1) above if—
(a)they are satisfied that—
(i)the settlement complies with the requirements of subsection (3) below ; and
(ii)the property is of a character and amount appropriate for the purposes of the settlement; and
(b)the trustees include a custodian trustee and are approved by the Treasury.
(3)The requirements referred to in subsection (2)(a) above are—
(a)that during the continuance of the settlement none of the property comprised in it can be applied otherwise than—
(i)for the maintenance, repair or preservation of, or making provision for public access to, a building or land which is for the time being a qualifying building or qualifying land as defined in subsection (5) below; or
(ii)as respects income not so applied and not accumulated, for the benefit of a body mentioned in paragraph 12 of Schedule 6 to the said Act of 1975 (museums etc.) or of a qualifying charity as defined in subsection (7) below ; and
(b)that on the termination of the settlement none of the property comprised in it can devolve otherwise than on any such body or charity as aforesaid.
(4)Where property is comprised in a settlement by virtue of a transfer of value exempt under this section the trustees shall from time to time furnish the Treasury with such accounts and other information relating to the settlement as the Treasury may reasonably require.
(5)A building or land is a qualifying building or qualifying land for the purposes of subsection (3)(a) above if—
(a)it has been designated under section 34(1)(b) or (c) of the [1975 c. 7.] Finance Act 1975 or section 77(1)(c) or (d) above; and
(b)the requisite undertaking has been given with respect to it under the said section 34 or under section 76, 78(5)(b) or 82(3) above ; and
(c)tax has not (since the last occasion on which such an undertaking was given) become chargeable with respect to it under the said section 34 or under section 78 or 82(3) above.
(6)If it appears to the Treasury that provision is, or is to be, made by a settlement for the maintenance, repair or preservation of any such property as is mentioned in subsection (1)(c) or (d) of section 77 above, they may, on a claim made for the purpose—
(a)designate that property under this subsection ; and
(b)accept with respect to it an undertaking such as is described in subsection (4) of that section;
and, if they do so, subsection (5) above shall have effect as if the designation were under that section and the undertaking under section 76 above and as if the reference to tax becoming chargeable were a reference to the occurrence of an event on which tax would become chargeable under section 78 above if there had been a conditionally exempt transfer of the property when the claim was made and the undertaking had been given under the said section 76.
(7)A charity is a qualifying charity for the purposes of subsection (3) above if it exists wholly or mainly for maintaining, repairing or preserving for the public benefit buildings of historic or architectural interest, land of scenic, historic or scientific interest or objects of national, scientific, historic or artistic interest.
In this subsection " national interest" includes interest within any part of the United Kingdom.
(8)In paragraph 15(1), (2) and (3) of Schedule 6 to the said Act of 1975 after the words " to 13 above " there shall be inserted the words " and section 84 of the Finance Act 1976 ".
(9)In the application of this section to Scotland for the reference in subsection (2)(b) above to a custodian trustee there shall be substituted a reference to any such body or charity as is mentioned in subsection (3) above or any other body approved by the Treasury for the purposes of this subsection.
(10)For the purposes of the application of this section to Northern Ireland, section 4(2) and (3) of the [1906 c. 55.] Public Trustee Act 1906 (custodian trustees) shall extend to Northern Ireland as if a trust corporation within the meaning of the [1933 c. 16 (N.I.).] Probates and Letters of Administration Act (Northern Ireland) 1933 were a body corporate entitled by rules made under the said Act of 1906 to act as a custodian trustee.
85Gifts for public benefit
In Schedule 6 to the [1975 c. 7.] Finance Act 1975, in paragraph 13(2)(f), for the words "or historic or scientific" there shall be substituted the words " scientific, historic or artistic ".
Mutual and voidable transfers
86Mutual transfers: exemption for donee's gift
(1)This section and section 87 below have effect where—
(a)a person (" the donor") makes a chargeable transfer (" the donor's transfer ") which increases the estate of another person (" the donee "); and
(b)the donee subsequently makes a transfer of value (" the donee's transfer ") which either—
(i)is made in the donor's life-time and increases the value of the estate of the donor or his spouse; or
(ii)is made within two years after the donor's death and increases the value of the estate of the donor's widow or widower.
(2)The donee's transfer shall be an exempt transfer to the extent to which the value thereby transferred does not exceed—
(a)the amount by which his estate was increased by the donor's transfer; or
(b)if there has been a previous donee's transfer, so much of that amount as has not been taken into account under this subsection for exempting that transfer.
(3)In subsection (1) above references to a transfer are references to a transfer (whether made before or after the passing of this Act) that is a disposition between individuals, including any disposition treated as made by virtue of section 20(7) of the Finance Act 1975 but not anything else that is treated as a disposition for the purposes of capital transfer tax.
(4)Subsection (1)(b) above has effect in relation to a person as the donor's spouse, widow or widower only if at the relevant time both the donor and that person were, or neither of them was, domiciled in the United Kingdom ; and for that purpose the relevant time is, in the case of a spouse, the time of the donee's transfer and, in the case of a widow or widower, the time of the donor's death.
(5)Where the donor has died before 1st April 1975 subsection (1)(b)(ii) above shall have effect with the substitution for the reference to his death of a reference to that date.
87Mutual transfers: relief for donor's gift
(1)The donor may, within six years after the donee's transfer, claim that for the purposes of this section the value transferred by the donor's transfer shall be treated as cancelled by the donee's transfer to the extent specified in subsection (3) below ; and thereupon—
(a)tax on the cancelled value paid or payable (whether or not by the claimant) shall be repaid to him by the Board or, as the case may be, shall not be payable; and
(b)the rate or rates of tax applicable to any chargeable transfer made by the donor after the claim shall be determined as if the values previously transferred by chargeable transfers made by the donor were reduced by the cancelled value.
(2)Where the donor has died, then—
(a)if the case falls within section 86(1)(b)(i) above, a claim may be made under subsection (1) above by the donor's personal representatives and paragraph (b) of that subsection shall apply as if for the reference to any chargeable transfer made by the donor after the claim there were substituted a reference to the chargeable transfer made by him on his death;
(b)if the case falls within section 86(1)(b)(ii) above, a claim may be made under subsection (1) above by the donor's widow or widower.
(3)The amount of the value transferred to be treated as cancelled by a donee's transfer shall be such amount thereof as, after deduction of the tax charged on it, is equal—
(a)if paragraph (b) below does not apply, to the value restored by the transfer ;
(b)if more than twelve months have elapsed between the donor's transfer and the donee's, to the value so restored reduced by 4 per cent. for every twelve months that have so elapsed ;
and where the cancelled amount is less than the whole of the value transferred it shall be treated as the highest part of that value.
(4)As between two or more donor's transfers made by the same donor to the same donee value transferred by a later transfer shall be treated as cancelled rather than value transferred by an earlier one; and where there has been a claim in respect of a previous donee's transfer references in the foregoing provisions of this section to the value transferred shall be construed as references to the part of that value not treated as cancelled by that transfer.
(5)For the purposes of subsection (3) above the value restored by the donee's transfer is so much of the value thereby transferred as does not exceed—
(a)the amount by which the donee's estate was increased by the donor's transfer ; or
(b)if there has been a previous donee's transfer, so much of that amount as was not taken into account as the value restored by that transfer.
(6)In paragraph (a) of subsection (1) above the reference to tax includes a reference to interest on tax.
(7)Tax repayable on a claim under this section shall carry interest (which shall not constitute income for any tax purposes) at the rate for the time being applicable under paragraph 19(1)(ii) of Schedule 4 to the [1975 c. 7.] Finance Act 1975 from the date on which the claim is made.
(8)For the purposes of liability to additional tax by reason of the donor's death within three years after the donor's transfer, the value thereby transferred which is treated as cancelled by a donee's transfer made before the death shall include any value that would be so treated if subsection (3)(b) above had not applied.
(9)Where the donee's transfer has increased the estate of the spouse, widow or widower of another person any value thereby transferred which can (or if a claim were made could) be taken into account as value restored in relation to a transfer made by the spouse, widow or widower shall not be so taken into account in relation to a transfer made by that other person.
88Voidable transfers
(1)Where on a claim made for the purpose it is shown that the whole or any part of a chargeable transfer (" the relevant transfer ") has by virtue of any enactment or rule of law been set aside as voidable or otherwise defeasible—
(a)tax paid or payable by the claimant (in respect of the relevant transfer or any other chargeable transfer made before the claim) that would not have been payable if the relevant transfer had been void ab initio shall be repaid to him by the Board, or as the case may be, shall not be payable ; and
(b)the rate or rates of tax applicable to any chargeable transfer made after the claim by the person who made the relevant transfer shall be determined as if that transfer or that part of it had been void as aforesaid.
(2)In subsection (1)(a) above " tax " includes interest on tax.
(3)Tax repayable on a claim under subsection (1) above shall carry interest (which shall not constitute income for any tax purposes) at the rate for the time being applicable under paragraph 19(1)(ii) of Schedule 4 to the [1975 c. 7.] Finance Act 1975 from the date on which the claim is made.
(4)This section applies in relation to transfers before as well as after the passing of this Act.
Dispositions that are not transfers of value
89Dispositions allowable for income tax or conferring retirement benefits
(1)A disposition made by any person is not a transfer of value if it is allowable in computing that person's profits or gains for the purposes of income tax or corporation tax or would be so allowable if those profits or gains were sufficient and fell to be so computed.
(2)Without prejudice to subsection (1) above, a disposition made by any person is not a transfer of value if—
(a)it is a contribution to a retirement benefits scheme which is approved by the Board for the purposes of Chapter II of Part II of the [1970 c. 24.] Finance Act 1970 (occupational pension schemes) and provides benefits in respect of service which is or includes service as an employee (as defined in that Chapter) of that person ; or
(b)it is made so as to provide—
(i)benefits on or after retirement for a person not connected with him who is or has been in his employ; or
(ii)benefits on or after the death of such a person for his widow or dependants,
and does not result in the recipient receiving benefits which, having regard to their form and amount, are greater than what could be provided under a scheme approved as aforesaid.
(3)Where a person makes dispositions of the kinds described in both paragraph (a) and paragraph (b) of subsection (2) above in respect of service by the same person, they shall be regarded as satisfying the conditions of that subsection only to the extent to which the benefits they provide do not exceed what could be provided by a disposition of the kind described in either of those paragraphs.
(4)For the purposes of subsection (2)(b) above, the right to occupy a dwelling rent-free or at a rent less than might be expected to be obtained in a transaction at arm's length between persons not connected with each other shall be regarded as equivalent to a pension at a rate equal to the rent or additional rent that might be expected to be obtained as aforesaid.
(5)Where a disposition satisfies the conditions of the preceding provisions of this section to a limited extent only, so much of it as satisfies them and so much of it as does not satisfy them shall be treated as separate dispositions.
(6)Paragraph 9 of Schedule 6 to the [1975 c. 7.] Finance Act 1975 (which is superseded by subsection (1) above) shall cease to have effect.
(7)This section applies to dispositions before as well as after the passing of this Act.
90Dispositions on trust for benefit of employees
(1)Subject to subsection (3) below, a disposition of property made to trustees by a close company whereby the property is to be held on trusts of the description specified in paragraph 17(1) of Schedule 5 to the Finance Act 1975 is not a transfer of value if the persons for whose benefit the trusts permit the property to be applied include all or most of either—
(a)the persons employed by or holding office with the company; or
(b)the persons employed by or holding office with the company or any one or more subsidiaries of the company.
(2)Subject to subsection (3) below, a disposition of property made to trustees by an individual beneficially entitled to shares in a company whereby the property is to be held on trusts of the said description is not a transfer of value if—
(a)the property consists of all the shares and securities of the company to which he is beneficially entitled; and
(b)immediately after the disposition there are no shares or securities of the company to which his spouse is beneficially entitled; and
(c)as a result of the disposition and of any other dispositions made on the same occasion, the trustees—
(i)hold all or substantially all of the ordinary shares in the company, and
(ii)have powers of voting on all questions affecting the company as a whole which if exercised would yield a majority of the votes capable of being exercised thereon; and
(d)the persons for whose benefit the trusts permit the property to be applied include all or most of the persons employed by or holding office with the company.
(3)Subject to subsection (4) below, subsections (1) and (2) above do not apply if the trusts permit any of the property to be applied at any time (whether during any such period as is referred to in the said paragraph 17(1) or later) for the benefit of—
(a)a person who is a participator in the company making the disposition or, as the case may be, the company whose shares are disposed of ; or
(b)any other person who is a participator in any close company that has made a disposition whereby property became comprised in the same settlement, being a disposition which but for this section would have been a transfer of value ; or
(c)any other person who has been a participator in any such company as is mentioned in paragraph (a) or (b) above at any time after, or during the ten years before, the disposition made by that company or, as the case may be, the disposition of its shares ; or
(d)any person who is connected with any person within paragraph (a), (b) or (c) above.
(4)The participators in a company who are referred to in subsection (3) above do not include any participator who on a winding-up of the company would not be entitled to 5 per cent. or more of its assets ; and in determining whether the trusts permit property to be applied as mentioned in that subsection, no account shall be taken of any power to make a payment which is the income of any person for any of the purposes of income tax, or would be the income for any of those purposes of a person not resident in the United Kingdom if he were so resident.
(5)In this section—
" close company " and " participator " have the same meanings as in section 39 of the [1975 c. 7.] Finance Act 1975 ;
" ordinary shares " means shares which carry either—
(a)
a right to dividends not restricted to dividends at a fixed rate, or
(b)
a right to conversion into shares carrying such a right as is mentioned in paragraph (a) above;
" subsidiary " has the same meaning as in the [1948 c. 38.] Companies Act 1948 ; and references in subsections (3) and (4) above to a participator in a company shall, in the case of a company which is not a close company, be construed as references to a person who would be a participator in the company if it were a close company.
(6)This section applies to dispositions made after 6th April 1976.
91Waiver of remuneration
(1)Subject to subsection (2) below, the waiver or repayment of an amount of remuneration shall not be a transfer of value if, apart from the waiver or repayment, that amount would be assessable to income tax under Schedule E.
(2)Where, apart from the waiver or repayment, the amount of the remuneration would be allowable as a deduction in computing for the purposes of income tax or corporation tax the profits or gains or losses of the person by whom it is payable or paid, this section applies only if, by reason of the waiver or repayment, it is not so allowed or is otherwise brought into charge in computing those profits or gains or losses.
(3)This section applies to waivers or repayments before as well as after the passing of this Act.
92Waiver of dividends
(1)A person who waives any dividend on shares of a company within twelve months before any right to the dividend has accrued does not by reason of the waiver make a transfer of value.
(2)This section applies to waivers before as well as after the passing of this Act.
Other exemptions and reliefs
93Exemption for transfers under ò,000
(1)In paragraph 2 of Schedule 6 to the [1975 c. 7.] Finance Act 1975 (exemption for transfers of value under £1,000) for " £1,000" wherever it occurs there shall be substituted " £2,000 ".
(2)This section does not affect the operation of paragraph 2 in relation to transfers of value made before 6th April 1976 or the amount which, under sub-paragraph (2) of that paragraph, may be carried forward to the year beginning on that date.
94Transfers between spouses
(1)In relation to transfers of value made after 6th April 1976, paragraph 1 of Schedule 6 to the Finance Act 1975 shall have effect with the following amendments.
(2)In sub-paragraph (1), for the words "the value of the estate of the transferor's spouse is increased" there shall be substituted the words " the value transferred is attributable to property which becomes comprised in the estate of the transferor's spouse or, so far as the value transferred is not so attributable, to the extent that that estate is increased ".
(3)In sub-paragraph (2)—
(a)for the words from " transfer is exempt " to " does not " there shall be substituted the words " value in respect of which the transfer is exempt (calculated as a value on which no tax is payable) shall not ";
(b)for the words " less any increase " there shall be substituted the words " less any amount ".
95Exempt transfers: modification of exceptions
(1)Paragraph 15 of Schedule 6 to the [1975 c. 7.] Finance Act 1975 shall be amended as follows.
(2)In sub-paragraph (3), in paragraph (b) the words " is given subject to an interest reserved or created by the donor or " shall be omitted and after that paragraph there shall be inserted—
“(ba)the property is an interest in possession in settled property and the settlement does not come to an end in relation to that settled property on the making of the transfer; or
(bb)the property is land or a building and is given subject to an interest reserved or created by the donor which entitles him, his spouse or a person connected with him to possession of, or to occupy, the whole or any part of the land or building rent-free or at a rent less than might be expected to be obtained in a transaction at arm's length between persons not connected with each other; or
(bc)the property is not land or a building and is given subject to an interest reserved or created by the donor other than—
(i)an interest created by him for full consideration in money or money's worth ; or
(ii)an interest which does not substantially affect the enjoyment of the property by the person or body to whom it is given ; or”.
(3)After sub-paragraph (4) there shall be inserted—
“(4A)Where a person or body acquires a reversionary interest in any settled property for a consideration in money or money's worth, paragraphs 1 and 10 to 13 above do not apply in relation to the property when it becomes the property of that person or body on the termination of the interest on which the reversionary interest is expectant.”
(4)Subsection (2) above applies in relation to transfers of value made after 15th April 1976 and subsection (3) applies where the acquisition of the reversionary interest is after that date.
96Exempt transfers: modification of Supplementary Provisions.
(1)In relation to transfers of value made after 6th April 1976, Part III of Schedule 6 to the [1975 c. 7.] Finance Act 1975 shall have effect with the amendments set out in subsections (2) to (6) below.
(2)In paragraph 16, for sub-paragraph (b) there shall be substituted—
“(b)paragraph 22 shall have effect as respects the burden of tax.”
(3)For sub-paragraph (1) of paragraph 19 there shall be substituted—
“(1)Such part of the value transferred shall be attributable to specific gifts as corresponds to the value of the gifts ; but if or to the extent that the gifts—
(a)are not gifts with respect to which the transfer is exempt or are outside the limit up to which the transfer is exempt, and
(b)do not bear their own tax,
the amount corresponding to the value of the gifts shall be taken to be the amount arrived at in accordance with sub-paragraphs (3) to (3B) below”.
(4)For sub-paragraph (3) of paragraph 19 there shall be substituted—
“(3)Where the only gifts with respect to which the transfer is or might be chargeable are specific gifts which do not bear their own tax, the amount referred to in sub-paragraph (1) above is the aggregate of—
(a)the sum of the value of those gifts, and
(b)the amount of tax which would be chargeable if the value transferred equalled that aggregate.
(3A)Where the specific gifts not bearing their own tax are not the only gifts with respect to which the transfer is or might be chargeable, the amount referred to in sub-paragraph (1) above is such amount as, after deduction of tax at the assumed rate specified in sub-paragraph (3B) below, would be equal to the sum of the value of those gifts.
(3B)For the purposes of sub-paragraph (3A) above—
(a)the assumed rate is the rate found by dividing the assumed amount of tax by that part of the value transferred with respect to which the transfer would be chargeable on the hypothesis that—
(i)the amount corresponding to the value of specific gifts not bearing their own tax is equal to the aggregate referred to in sub-paragraph (3) above, and
(ii)the parts of the value transferred attributable to specific gifts and to gifts of residue or shares in residue are determined accordingly; and
(b)the assumed amount of tax is the amount that would be charged on the value transferred on the hypothesis mentioned in paragraph (a) above.”
(5)For paragraph 22 there shall be substituted—
“Burden of tax
22Notwithstanding the terms of any disposition—
(a)none of the tax on the value transferred shall fall on any specific gift if or to the extent that the transfer is exempt with respect to the gift; and
(b)none of the tax attributable to the value of property comprised in residue shall fall on any gift of a share of residue if or to the extent that the transfer is exempt with respect to the gift.”
(6)At the end of paragraph 23 there shall be added—
“(3)Where—
(a)the whole or part of the value transferred by a transfer of value is attributable to property which is the subject of two or more gifts, and
(b)the aggregate of the values of the property given by each of those gifts is less than the value transferred or, as the case may be, that part of it,
then for the purposes of this Part of this Schedule (and notwithstanding the definition of a gift in sub-paragraph (1) above) the value of each gift shall be taken to be the relevant proportion of the value transferred or, as the case may be, that part of it; and the relevant proportion in relation to any gift is the proportion which the value of the property given by it bears to the said aggregate.”
(7)After paragraph 22 of Schedule 6 to the [1975 c. 7.] Finance Act 1975 there shall be inserted the following paragraph—
“Legal rights in Scotland
22A(1)Where on the death of a person legal rights are claimed by a person entitled to claim such rights, those rights shall be treated as a specific gift which bears its own tax.
(2)In determining the value of legal rights mentioned in sub-paragraph (1) above, any capital transfer tax repayable on the estate of the deceased shall be left out of account.
(3)In the case of any death occurring after 13th March 1975 and before the passing of the Finance Act 1976, the executors of the deceased may elect that this paragraph shall apply to the estate of the deceased.
(4)This paragraph extends to Scotland only”.
97Relief for successive charges
(1)Section 30 of the [1975 c. 7.] Finance Act 1975 shall have effect, and be deemed always to have had effect, as if for subsection (3) there were substituted—
“(3)Where the value of a person's estate was increased—
(a)on a death on which estate duty was payable ; or
(b)in consequence of—
(i)a gift inter vivos ; or
(ii)a disposition or determination of a beneficial interest in possession in any property comprised in a settlement,
where, by reason of the gift or interest, estate duty or capital transfer tax under section 22(5) of this Act was payable on a subsequent death,
the preceding provisions of this section shall apply with the necessary modifications and, in particular, as if the increase had been by a chargeable transfer on the occasion of the death and, in a case where estate duty was payable, that duty had been tax on the value transferred thereby.”
(2)Paragraph 5 of Schedule 5 to the said Act of 1975 shall have effect, and be deemed always to have had effect, as if for sub-paragraph (2) there were substituted—
“(2)Where the transferor became entitled to the interest—
(a)on a death on which estate duty was payable in respect of the settled property ; or
(b)in consequence of—
(i)a gift inter vivos ; or
(ii)a disposition or determination of a beneficial interest in possession in any property comprised in a settlement,
where, by reason of the gift or interest, estate duty or capital transfer tax under section 22(5) of this Act was payable on a subsequent death in respect of the settled property,
sub-paragraph (1) above shall apply as if the period referred to therein were the period between the death and the chargeable transfer.”
98Gifts to spouses-relief from transitional charge
For the purpose of determining in relation to a death after 6th April 1976 whether any increase is to be made in the deceased's estate by virtue of section 22(5) of the Finance Act 1975 (which provides for such an increase in certain cases where, by reason of a gift or an interest in possession under a settlement, property would have been within the charge to estate duty), section 121(1)(c) of the [1972 c. 41.] Finance Act 1972 (relief from estate duty for gifts etc. to the deceased's widow or widower) shall have effect as if the reference to a widow or widower included a reference to a spouse who died before the deceased.
99Transfers within three years before death
(1)Subject to the following provisions, this section applies where additional tax becomes chargeable in respect of the value transferred by a chargeable transfer because of the transferor's death within three years of the transfer and all or part of the value transferred is attributable to the value of property (" the transferred property ") which—
(a)is, at the date of the death, the property of the person (" the transferee ") whose property it became on the transfer or of his spouse, or
(b)has, before that date, been sold by the transferee or his spouse by a qualifying sale ;
and in the following provisions of this section " the relevant date " means, in a case within sub-paragraph (a) above, the date of the death, and in a case within sub-paragraph (b), the date of the qualifying sale.
(2)If the market value of the transferred property at the time of the chargeable transfer exceeds its market value on the relevant date, the additional tax shall be calculated as if the value transferred were reduced by the amount of the excess.
(3)This section shall not apply unless—
(a)the transferor's death occurs after 6th April 1976, and
(b)a claim is made by a person liable to pay the whole or part of the additional tax.
(4)This section shall not apply if the transferred property is tangible movable property that is a wasting asset, and in other cases shall apply subject to the provisions of Schedule 12 to this Act.
(5)For the purposes of this section the market value at any time of any property is the price which the property might reasonably be expected to fetch if sold in the open market at that time; but—
(a)that price shall not be assumed to be reduced on the ground that the whole property is on the market at one and the same time ; and
(b)paragraph 13 of Schedule 10 to the [1975 c. 7.] Finance Act 1975 shall apply as it applies for determining the value of unquoted shares and securities for the purposes of tax.
(6)A sale is a qualifying sale for the purposes of this section if—
(a)it is at arm's length for a price freely negotiated at the time of the sale ; and
(b)no person concerned as vendor (or as having an interest in the proceeds of the sale) is the same as or connected with any person concerned as purchaser (or as having an interest in the purchase); and
(c)no provision is made, in or in connection with the agreement for the sale, that the vendor (or any person having an interest in the proceeds of sale) is to have any right to acquire some or all of the property sold or some interest in or created out of it.
(7)The transferred property is a wasting asset for the purposes of this section if, immediately before the chargeable transfer, it had a predictable useful life not exceeding fifty years, having regard to the purpose for which it was held by the transferor; and plant and machinery shall in every case be regarded as having a predictable useful life of less than fifty years.
Valuation
100Liability for tax not in fact paid
(1)In paragraph 9 of Schedule 10 to the [1975 c. 7.] Finance Act 1975 after sub-paragraph (2) there shall be inserted—
“(2A)If in determining the value of a person's estate immediately before his death a liability for tax is taken into account, then, if that tax or any part of it is not in the event paid out of the estate, the value of the estate immediately before his death shall be treated as increased by an amount equal to that tax or so much of it as is not so paid.”
(2)This section has effect in relation to deaths occurring after 15th April 1976.
101Falls in value of land after death
(1)At the end of paragraph 9 of Schedule 10 to the Finance Act 1975 there shall be added—
“(4)Part III of this Schedule shall apply with respect to the valuation of interests in land which are comprised in a person's estate immediately before his death and are sold by the appropriate person (as defined in that Part) within the period of three years immediately following the' date of the death.”
(2)After Part II of the said Schedule there shall be added the provisions set out in Schedule 13 to this Act.
(3)This section has effect in relation to deaths occurring after 6th April 1976.
102Sales of related property after a death
(1)After paragraph 9 of Schedule 10 to the [1975 c. 7.] Finance Act 1975 there shall be inserted—
“9A(1)This paragraph has effect where, within three years after the death of any person, there is a qualifying sale of any property (" the relevant property ") comprised in his estate immediately before his death and valued for the purposes of tax—
(a)in accordance with paragraph 7 above, or
(b)in conjunction with property which was also comprised in the estate but has not at any time since the death been vested in the vendors.
(2)If a claim is made for relief under this paragraph then, subject to sub-paragraphs (4) and (5) below, the value of the relevant property immediately before the death shall be taken to be what it would have been if it had not been determined as mentioned in sub-paragraph (1) above.
(3)For the purposes of sub-paragraph (1) above a sale is a qualifying sale if—
(a)the vendors are the persons in whom the relevant property vested immediately after the death or the deceased's personal representatives; and
(b)it is at arm's length for a price freely negotiated at the time of the sale and is not made in conjunction with a sale of any of the related property taken into account as mentioned in sub-paragraph (1)(a) above or any of the property mentioned in sub-paragraph (1)(b) above ; and
(c)no person concerned as vendor (or as having an interest in the proceeds of sale) is the same as or connected with any person concerned as purchaser (or as having an interest in the purchase); and
(d)neither the vendors nor any other person having an interest in the proceeds of sale obtain in connection with the sale a right to acquire the property sold or any interest in or created out of it.
(4)Sub-paragraph (2) above shall not apply unless the price obtained on the sale, with any adjustment needed to take account of any difference in circumstances at the date of the sale and at the date of the death, is less than the value which, apart from this paragraph and apart from Part III of this Schedule, would be the value of the relevant property determined as mentioned in sub-paragraph (1) above.
(5)Where the relevant property consists of shares in or securities of a close company, sub-paragraph (2) above shall not apply if at any time between the death and the qualifying sale the value of the shares or securities is reduced by more than 5 per cent. as a result of an alteration in the company's share or loan capital or, in any rights attaching to shares in or securities of the company; and for the purposes of this sub-paragraph—
" alteration " includes extinguishment, and
" close company " has the same meaning as in section 39 of this Act."”
(2)This section has effect in relation to deaths occurring after 6th April 1976
103Related property: property given to charities, etc.
(1)In paragraph 7 of Schedule 10 to the [1975 c. 7.] Finance Act 1975, at the end of sub-paragraph (2) there shall be added “or
(c)it is or has within the preceding five years been—
(i)the property of a charity, or held on trust for charitable purposes only, or
(ii)the property of a body mentioned in paragraph 11, 12 or 13 of Schedule 6 to this Act,
and became so on a transfer of value which was made by him or his spouse after 15th April 1976 and was exempt to the extent that the value transferred was attributable to the property”.
(2)This section has effect in relation to transfers of value before as well as after the passing of this Act.
104Sales of certain securities within twelve months after a death
Where the estate of a person who dies after 6th April 1976 comprises shares or securities in respect of which quotation on a recognised stock exchange is suspended at the date of the death, the shares or securities shall be qualifying investments for the purposes of Part II of Schedule 10 to the Finance Act 1975 if they are again quoted on a recognised stock exchange at the time when they are sold as mentioned in paragraph 15 or exchanged as mentioned in paragraph 24 of that Schedule.
Settled property
105Survivorship clauses
(1)Schedule 5 to the Finance Act 1975 shall have effect, and subject to subsections (2) and (3) below shall be deemed always to have had effect, as if paragraph 6(7) were omitted and the following paragraph inserted after paragraph 22—
“Survivorship clauses
22A(1)Where under the terms of a will or otherwise property is held for any person on condition that he survives another for a specified period of not more than six months, this Part of this Act shall apply as if the dispositions taking effect at the end of the period or, if he does not survive until then, on his death (including any such disposition which has effect by operation of law or is a separate disposition of the income from the property) had had effect from the beginning of the period.
(2)Sub-paragraph (1) above does not affect the application of this Part of this Act in relation to any distribution or application of property occurring before the dispositions there mentioned take effect.
(3)Where the death with which the period mentioned in sub-paragraph (1) above begins occurred before 13th March 1975, that sub-paragraph shall not apply in relation to any property if or to the extent that, by virtue of section 121(1)(c) of the [1972 c. 41.] Finance Act 1972 (relief for property given to a surviving spouse), the value attributable to it was disregarded for the purposes of estate duty chargeable on that death.”
(2)Subsection (1) above shall not have effect in a case where the period there mentioned ended before 7th April 1976 if the application at the end of the period of sub-paragraph (2) of paragraph 6 of the said Schedule 5 was excluded by sub-paragraph (7) of that paragraph.
(3)Where the person for whom property was held as mentioned in subsection (1) above—
(a)was the spouse of the other person there mentioned, and
(b)died before the end of 1976 and during the period there mentioned,
that subsection shall not have effect if the persons mentioned in subsection (4) below so elect by written notice given to the Board within twelve months of the second death or such longer time as the Board may allow.
(4)The persons referred to in subsection (3) above are the personal representatives of each spouse and the trustees of every settlement in which either of the spouses had an interest in possession immediately before his death.
106Accumulation and maintenance settlements
(1)In paragraph 15 of Schedule 5 to the [1975 c. 7.] Finance Act 1975, at the end of sub-paragraph (1) there shall be added the words “and
(c)either—
(i)not more than twenty-five years have elapsed since the day on which the settlement was made or, if it was later, since the time (or latest time) when the conditions stated in paragraphs (a) and (b) above became satisfied with respect to the property or part; or
(ii)all the persons who are or have been beneficiaries are or were either grandchildren of a common grandparent or children, widows or widowers of such grandchildren who were themselves beneficiaries but died before the time when, had they survived, they would have become entitled as mentioned in paragraph (a) above.”
(2)For sub-paragraphs (4) and (5) of the said paragraph 15 there shall be substituted—
“(4)Where the conditions stated in paragraphs (a) and (b) of sub-paragraph (1) above were satisfied on 15th April 1976 with respect to any property comprised in a settlement made before that day, paragraph (c)(i) of that sub-paragraph shall have effect with the substitution of a reference to that day for the reference to the day on which the settlement was made, and the condition stated in paragraph (c)(ii) shall be treated as satisfied if—
(a)it is satisfied in respect of the period beginning with 15th April 1976 ; or
(b)it is satisfied in respect of the period beginning with 1st April 1977 and either there was no beneficiary living on 15th April 1976 or the beneficiaries on 1st April 1977 include a living beneficiary ; or
(c)there is no power under the terms of the settlement whereby it could have become satisfied in respect of the period beginning with 1st April 1977, and the trusts of the settlement have not been varied at any time after 15th April 1976.
(5)In sub-paragraph (1) above " persons " includes unborn persons ; but the conditions stated in paragraphs (a) and (b) of that sub-paragraph shall be treated as not satisfied unless there is or has been a living beneficiary.
(6)Paragraph 11 above shall apply for the interpretation of this paragraph as it applies for the interpretation of paragraphs 6 to 10 ; and for the purposes of this paragraph a person's children shall be taken to include his illegitimate children, his adopted children and his step-children.”
(3)In paragraph 14(5)(b) of the said Schedule 5, after the word " therein " there shall be inserted the words " living at the time of the capital distribution ".
107Employee trusts
(1)Paragraph 17 of Schedule 5 to the [1975 c. 7.] Finance Act 1975 shall be amended as follows.
(2)After sub-paragraph (4) there shall be inserted—
“(4A)Where any property to which this paragraph applies ceases to be comprised in a settlement and, either immediately or not more than one month later, the whole of it becomes comprised in another settlement, then, if this paragraph again applies to it when it becomes comprised in the second settlement, it shall be treated for all the purposes of this Part of this Act as if it had remained comprised in the first settlement.”
(3)At the end of sub-paragraph (6) there shall be added the words “except that if more than one relevant anniversary has passed and, accordingly, more than one deferred tax becomes chargeable—
(a)the second deferred tax shall be charged on that value less the amount of the first deferred tax ; and
(b)the third deferred tax (if any) shall be charged on the amount found under paragraph (a) above less the amount of the second deferred tax ;
and so on.”
(4)In sub-paragraph (9)(b) for the words "is chargeable" there shall be substituted the words " would, apart from sub-paragraph (7)(b) above, be chargeable ".
(5)This section shall be deemed to have come into force on 7th April 1976.
108Newspaper trusts
(1)The following paragraph shall be inserted after paragraph 17 of Schedule 5 to the [1975 c. 7.] Finance Act 1975—
“17A(1)In relation to property comprised in a settlement to which this paragraph applies, paragraph 17 above shall have effect as if newspaper publishing companies were included among the persons within paragraphs (a) to (c) of sub-paragraph (1) of that paragraph.
(2)This paragraph applies to a settlement if shares in a newspaper publishing company or a newspaper holding company are the only or principal property comprised in the settlement.
(3)In this paragraph—
" newspaper publishing company " means a company whose business consists wholly or mainly in the publication of newspapers in the United Kingdom ; and
" newspaper holding company " means a company which—
(a)
has as its only or principal asset shares in a newspaper publishing company, and
(b)
has powers of voting on all or most questions affecting the publishing company as a whole which if exercised would yield a majority of the votes capable of being exercised thereon;
and for the purposes of this paragraph shares shall be treated as the principal property comprised in a settlement or the principal asset of a company if the remaining property comprised in the settlement or the remaining assets of the company are such as may be reasonably required to enable the trustees or the company to secure the operation of the newspaper publishing company concerned.”
(2)This section shall be deemed to have come into force on 7th April 1976.
109Remuneration of trustees
After paragraph 19 of Schedule 5 to the [1975 c. 7.] Finance Act 1975 there shall be inserted—
“Trustees' annuities etc.
19AWhere under the terms of a settlement a person is entitled by way of remuneration for his services as trustee to an interest in possession in property comprised in the settlement, then, except to the extent that the interest represents more than a reasonable amount of remuneration,—
(a)the interest shall be left out of account in determining for the purposes of this Part of this Act the value of his estate immediately before his death, and
(b)tax shall not be charged under paragraph 4(2) above when the interest comes to an end.”
110Settlor's widow
(1)At the end of section 22(3) of the Finance Act 1975 there shall be added—
“The references in this subsection to the settlor's spouse include, in a case where the settlor died less than two years before the deceased or the deceased died before 1st April 1977, references to the settlor's widow or widower.”
(2)In paragraph 4 of Schedule 5 to that Act, at the end of sub-paragraph (6) there shall be added—
“The references in this sub-paragraph to the settlor's spouse include, in a case where the settlor has died less than two years before the interest comes to an end or the interest comes to an end before 1st April 1977, references to the settlor's widow or widower.”
(3)In paragraph 6 of that Schedule, at the end of sub-paragraph (6) there shall be added—
“The references in this sub-paragraph to the settlor's spouse include, in the case of a distribution payment made less than two years after the settlor's death or made before 1st April 1977, references to the settlor's widow or widower”.
(4)This section shall be deemed always to have had effect.
111Distributions to charities etc.
(1)For sub-paragraph (2) of paragraph 10 of Schedule 6 to the [1975 c. 7.] Finance Act 1975 there shall be substituted—
“(2)Subject to the provisions of Part II of this Schedule, where property comprised in a settlement is given to a charity, the payment or transfer of the property out of the settlement shall not be a distribution payment for the purposes of Schedule 5 to this Act.”
(2)In paragraph 11 of the said Schedule 6, after sub-paragraph (1) there shall be inserted—
“(1A)Subject to the provisions of Part II of this Schedule, where property comprised in a settlement becomes the property of a political party qualifying for exemption under this paragraph, the payment or transfer of the property out of the settlement shall not be a distribution payment for the purposes of Schedule 5 to this Act.”
(3)At the end of paragraph 12 of the said Schedule 6 there shall be added—
“(2)Subject to the provisions of Part II of this Schedule, where property comprised in a settlement becomes the property of a body mentioned in sub-paragraph (1) above, the payment or transfer of the property out of the settlement shall not be a distribution payment for the purposes of Schedule 5 to this Act.”
(4)In paragraph 13 of the said Schedule 6, after sub-paragraph (1) there shall be inserted—
“(1A)Subject to the provisions of Part II of this Schedule, where—
(a)property comprised in a settlement becomes at any time the property of a body not established or conducted for profit, and
(b)the Treasury so direct (whether before or after that time),
the payment or transfer of the property out of the settlement shall not be a distribution payment for the purposes of Schedule 5 to this Act.”;
in sub-paragraphs (3) and (4) for the words " sub-paragraph (1) above " there shall be substituted the words " this paragraph "; and at the end of sub-paragraph (7) there shall be added the words " or if both become the property of the same body on the making of the same payment or transfer out of a settlement ".
(5)At the end of paragraph 15 of the said Schedule 6 there shall be added—
“(6)In a case where property is given by a payment or transfer out of a settlement this paragraph shall have effect as if—
(a)any reference to a transfer of value were a reference to the payment or transfer, and
(b)paragraphs (b) to (bc) of sub-paragraph (3) above were omitted.”
(6)This section shall be deemed to have come into force on 7th April 1976.
112Settled property: other amendments
Schedule 14 to this Act (which makes further amendments in relation to settled property) shall have effect.
Application of tax rates
113Chargeable transfers made on same day
(1)At the end of section 43 of the [1975 c. 7.] Finance Act 1975 there shall be added—
“(3)Subject to subsection (2) above, the rate at which tax is charged on the values transferred by two or more chargeable transfers made by the same person on the same day shall be the effective rate at which tax would have been charged if those transfers had been a single chargeable transfer of the same total value.
(4)The chargeable transfers referred to in subsections (2) and (3) above do not include a transfer made on the death of the transferor.
(5)For the purposes of subsections (2) and (3) above, capital distributions shall be treated as made by the same person if they are made out of property comprised in the same settlement.”
(2)This section has effect in relation to chargeable transfers made after 15th April 1976.
114Transfers reported late
(1)This section has effect where a person has made a transfer of value (" the earlier transfer ") which—
(a)is not notified to the Board in an account under paragraph 2, or by information furnished under paragraph 5, of Schedule 4 to the Finance Act 1975 before the expiration of the period specified in paragraph 2 for the delivery of accounts ; and
(b)is not discovered until after payment has been accepted by the Board in full satisfaction of the tax on the value transferred by another transfer of value (" the later transfer ") made by him on or after the day on which he made the earlier transfer.
(2)For the purposes of section 37 of the [1975 c. 7.] Finance Act 1975 (except so much of that section as determines the appropriate Table) the earlier transfer shall be treated as if it had been made on the date on which it was discovered or, if the later transfer is made on death, immediately before the later transfer.
(3)Where the later transfer is the relevant transfer for the purposes of paragraph 7 of Schedule 5 to the said Act of 1975, the earlier transfer shall not by virtue of subsection (2) above be treated for those purposes as made after the later transfer.
(4)Subsection (2) above shall not increase the amount in respect of which interest is payable under paragraph 19 of Schedule 4 to the said Act of 1975 in relation to the earlier transfer in respect of any period falling before the expiration of six months from the date on which it was discovered.
(5)Where, apart from this subsection, the earlier transfer would be wholly or partly exempt by reason of some or all of the value thereby transferred falling within a limit applicable to an exemption, then, if tax has been accepted as mentioned in subsection (1)(b) above on the basis that the later transfer is partly exempt by reason of part of the value thereby transferred falling within that limit—
(a)tax shall not be chargeable on that part of the value transferred by the later transfer; but
(b)a corresponding part of the value transferred by the earlier transfer shall be treated as falling outside that limit.
(6)Subsection (1)(b) above shall apply to a transfer in respect of which no tax is chargeable because the rate of tax applicable under the said section 37 is nil as if payment had been accepted when the transfer was notified in an account under paragraph 2 of the said Schedule 4.
(7)For the purposes of this section a transfer is discovered—
(a)if it is notified under the provisions mentioned in subsection (1)(a) above after the expiration of the period there mentioned, on the date on which it is so notified ;
(b)in any other case, on the date on which the Board give notice of a determination in respect of the transfer under paragraph 6 of the said Schedule 4.
(8)This section shall apply to distribution payments as defined in paragraph 11 of the said Schedule 5 and to capital distributions as it applies to transfers of value; and for the purposes of this section such payments or distributions shall be treated as made by the same person if they are made out of property comprised in the same settlement.
Loans
115Free loans etc.
(1)Where an individual (" the lender ") allows another person (" the borrower ") the use of money or other property in any year, then, subject to the provisions of this section and section 116 below, the lender shall be treated as making a disposition as a result of which the value of his estate is reduced by the amount (if any) by which any consideration for the use falls short of the cost to him of allowing it (determined in accordance with section 116 below).
(2)The disposition under subsection(1) above shall be treated as made at the end of the year or, if earlier, at the time when the use comes to an end.
(3)Where the use of the property is allowed for a period specified in advance, or where in any other case the lender has no right to terminate the use immediately after it begins, subsection (1) above shall not apply in relation to use before the expiration of the specified period or, as the case may be, before the earliest time when the lender could terminate the use if he exercised his right to do so at the earliest opportunity.
(4)Subsection (1) above shall not apply in relation to any use of property allowed to the borrower at a time when it is mainly used by the lender or the lender's spouse.
(5)Subsection (1) above shall not apply in relation to the use of property for a period which is less than twelve months unless that period falls within a period of twenty-four months during which the lender allows the borrower the use of that property or similar property for periods which amount in aggregate to twelve months or more; and in calculating that aggregate no account shall be taken of—
(a)use to which, by virtue of subsection (3) or (4) above, subsection (1) does not apply, or
(b)use to which (apart from this subsection) subsection (1) above does apply, if the disposition under that subsection is not a transfer of value.
(6)Subsection (1) above shall not apply in relation to the use of property where the borrower is a body corporate if—
(a)it is not a close company; or
(b)not less than 90 per cent. in nominal value of its issued ordinary shares are shares to which the lender or his spouse is beneficially entitled ; or
(c)it is not an investment company and either—
(i)the lender or his spouse is a participator in the company or its holding company or has been such a participator at any time during the year or either of the two preceding years ; or
(ii)the lender's spouse died during the year or either of the two preceding years and was at any time during the three years ending with the year in which he died a participator in the company or its holding company.
(7)Subsection (1) above shall not apply in relation to the use of property where the borrower is a firm if—
(a)the lender or his spouse is a partner or has been a partner at any time during the year or either of the two preceding years; or
(b)the lender's spouse died during the year or either of the two preceding years and was a partner at any time during the three years ending with the year in which he died.
(8)Subsection (1) above shall not apply in relation to a loan in respect of which any person is chargeable to income tax under Schedule E by virtue of section 66(1) above.
(9)For the purposes of this section an individual who makes a revocable gift of any property to another person shall, so long as the gift continues revocable, be taken to allow him the use of that property.
(10)In this section—
" close company " and " participator " have the same meanings as in section 39 of the [1975 c. 7.] Finance Act 1975 ;
" firm " has the same meaning as in the [1890 c. 39.] Partnership Act 1890;
" holding company " has the same meaning as in section 154 of the [1948 c. 38.] Companies Act 1948 ;
" investment company " means a company falling within paragraph (a) of paragraph 16(3) of Schedule 4 to the Finance Act 1975 and not falling also within paragraph (b) or (c) of that paragraph ;
" ordinary shares " has the same meaning as in paragraph 13 of that Schedule ;
" year " means period of twelve months beginning with 6th April.
(11)This section has effect, in place of section 41 of the Finance Act 1975, in relation to the year beginning 6th April 1976 and subsequent years.
116Free loans etc.: value transferred
(1)The cost to the lender of allowing the use of money or land shall be taken to be equal to the consideration which might be expected in a transaction on the same terms as those on which the use is allowed (apart from terms as to consideration) made at arm's length between persons not connected with each other.
(2)The cost to the lender of allowing the use of property other than money or land shall be taken to be equal to the aggregate of—
(a)the annual value of the use of the property or, if the use does not continue throughout the year, a proportionate part of that annual value, and
(b)any expense incurred by the lender in connection with property during the year or, if the use does not continue throughout the year, a proportionate part of that expense, but excluding expense incurred in the acquisition or production of the property and excluding any hire charges;
except that if the property is hired by the lender and the annual amount of the hire charges is greater than the annual value of the use of the property, paragraph (a) above shall have effect as if it referred to that annual amount instead of to that annual value.
(3)If the property is money or land, the amount arrived at under section 115(1) above shall be reduced by the income tax which would be chargeable in respect of that amount (after taking account in the case of land of any deductions which might be made for the purposes of Schedule A) if it were the highest part of the lender's total income ; and in calculating that income there shall be disregarded any such sum as is mentioned in paragraphs (a) to (c) of section 529 of the Taxes Act.
117Modification of exemptions for loans
(1)Schedule 6 to the [1975 c. 7.] Finance Act 1975 shall apply with the following modifications to—
(a)any transfer of value which is a disposition under section 115 above, and
(b)any other transfer of value, whether made before or after the passing of this Act, if or to the extent that it is a disposition whereby the use of money or other property is allowed by one person (" the lender") to another (" the borrower ").
(2)For the purposes of paragraph 1 (transfers between spouses) the borrower's estate shall be treated as increased by an amount equal to the value transferred.
(3)For the purposes of paragraphs 4 (small gifts) and 6 (gifts in consideration of marriage) the transfer of value shall be treated as made by outright gift.
(4)Paragraph 5(1) (normal expenditure out of income) shall apply as if for the conditions stated in paragraphs (a) and (b) there were substituted the condition that the transfer was a normal one on the part of the transferor.
(5)Paragraphs 10 and 11 (gifts to charities and to political parties) shall apply without sub-paragraph (1)(b) (£100,000 limit for transfers within one year of death); and for the purposes of those paragraphs and paragraphs 12 and 13 (gifts for national purposes and for public benefit)—
(a)the value transferred shall be treated as attributable to the property of which the borrower is allowed the use, and
(b)that property shall be treated as given to, or as becoming the property of, the borrower unless the use allowed includes use for purposes other than charitable purposes or those of a body mentioned in paragraph 11, 12 or 13.
(6)Part II (exceptions) shall not apply.
Miscellaneous
118Close companies
(1)In section 39 of the [1975 c. 7.] Finance Act 1975 the following subsections shall be inserted after subsections (6) and (8) respectively:—
“(6A)In determining for the purposes of this section whether a disposition made by a close company is a transfer of value or what value is transferred by such a transfer no account shall be taken of the surrender by the company, in pursuance of section 258 of the Taxes Act or of section 92 of the Finance Act 1972, of any relief or of the benefit of any amount of advance corporation tax paid by it.
(8A)Where part of a close company's share capital consists of preference shares (within the meaning of section 234(3) of the Taxes Act) and a transfer of value made by that or any other close company has only a small effect on the value of those shares, compared with its effect on the value of other parts of the company's share capital, the preference shares shall be left out of account in determining the respective rights and interests of the participators for the purposes of this section.
(8B)Where a close company (in this subsection and subsection (8C) below referred to as the transferor company) is a member, but not the principal member, of a group; and—
(a)a disposal by the transferor company of any asset is a disposal to which section 273(1) of the Taxes Act applies and is also a transfer of value; and
(b)the transfer of value has only a small effect on the value of the minority participators' rights and interests in that company compared with its effect on the value of the other participators' rights and interests in the company ;
the rights and interests of the minority participators shall be left out of account in determining the respective rights and interests of the transferor company's participators for the purpose of apportioning the value transferred under this section.
(8C)For the purposes of subsection (8B) above—
(a)the principal member of a group is the member of which all the other members are 75 per cent. subsidiaries; and
(b)a minority participator is a participator of the transferor company who is not, and is not a person connected with, a participator of the principal member of the group or of any of the principal member's participators ;
and in that subsection and this subsection " group " and " 75 per cent. subsidiary " have the same meanings as in section 272 of the Taxes Act.
(8D)Where the value of the estate of a company (in this subsection referred to as the transferee company) is increased as the result of a transfer of value made by a close company (in this subsection referred to as the transferor company) and an individual to whom part of the value transferred is apportioned under this section has an interest in the transferee company (or in a company which is a participator of the transferee company or any of its participators, and so on), then, in computing for the purposes of this section the amount to be offset, that is to say, the amount by which the value of his estate is more than it would be but for the transfer,—
(a)the increase in the value of the transferee company's estate shall be taken to be such part of the value transferred as accounts for the increase ; and
(b)the increase so computed shall be apportioned among the transferee company's participators according to their respective rights and interests in the company immediately before the transfer (and, where necessary, further apportioned among their participators, and so on), and the amount so apportioned to the individual shall be taken to be the amount to be offset”.
(2)Where, by virtue of section 39(5) of the [1975 c. 7.] Finance Act 1975, an alteration in a close company's share or loan capital or of any rights attaching to shares in or debentures of a close company is treated as a disposition made by the participators, and—
(a)a person is a participator in his capacity as trustee of a settlement; and
(b)the disposition would, if the trustee were beneficially entitled to the settled property, be a transfer of value made by him;
subsection (3) below shall apply if at the time of the alteration an individual is beneficially entitled to an interest in possession in the whole or part of so much of the settled property as consists of shares in or securities of the close company which are not quoted on a recognised stock exchange, and subsection (4) below shall apply unless at that time an individual is beneficially entitled to an interest in possession in the whole of so much of the settled property as consists of such shares or securities.
(3)Where this subsection applies such part of the individual's interest shall be deemed for the purposes of paragraph 4 of Schedule 5 to the [1975 c. 7.] Finance Act 1975 to come to an end at the time of the alteration as corresponds to the relevant decrease of the value of the property in which the interest subsists, that is to say the decrease caused by the alteration.
(4)Where this subsection applies, a capital distribution shall be deemed to be made at the time of the alteration out of so much of the settled property as—
(a)consists of shares in or securities of the close company which are not quoted on a recognised stock exchange ; and
(b)is not a part in which at the time of the alteration an interest in possession subsists to which an individual is beneficially entitled;
and the amount of the capital distribution shall be taken to be the amount by which the value of the property out of which it is treated as being made is less than it would be but for the alteration, and that amount shall for the purposes of paragraphs 7 to 9 of Schedule 5 to the Finance Act 1975 be deemed to be a distribution payment made out of that property ; and paragraph 6(4)(a) of that Schedule shall have effect, in relation to a capital distribution treated as made under this subsection as if the words " less the tax payable on it" were omitted.
(5)In paragraph 24(1)(b) of Schedule 5 to the Finance Act 1975 for the words " subsection (4) " there shall be substituted the words " subsections (4) and (8D) ".
(6)In section 39(2)(a) of the Finance Act 1975 after the words " corporation tax " there shall be inserted the words " or would fall to be so taken into account but for section 239 of the Taxes Act ".
(7)At the end of section 39(5) of the [1975 c. 7.] Finance Act 1975 there shall be added the words " and shall not be taken to have affected the value immediately before that time of the shares or debentures not so quoted ".
(8)At the end of paragraph 8 of Schedule 6 to the Finance Act 1975 there shall be added the words " but references in paragraph 2 above to transfers of value made by a transferor and to the values transferred by them (calculated as there mentioned) include references to apportionments made to a person under section 39 of this Act and the amounts for the tax on which (if charged) he would be liable ".
(9)In paragraph 9(2) of Schedule 10 to the Finance Act 1975 after the words " an increase or decrease of the value of any property so comprised " there shall be inserted the words " other than a decrease resulting from such an alteration as is mentioned in section 39(5) of this Act ".
(10)The preceding provisions of this section have effect as follows:—
(a)subsections (1), (5), (6) and (8) in relation to transfers of value or dispositions made after 15th April 1976 ; and
(b)subsections (2) to (4), (7) and (9) in relation to alterations made or deaths occurring after 27th May 1976.
119Liability for tax in respect of transfer by spouse
(1)Section 25(8) of the Finance Act 1975 (which makes the transferor's spouse liable for tax in respect of a chargeable transfer to the extent of the value of property acquired by the spouse on another transfer made by the transferor) shall have effect as if for the reference to the value of the property (" the transferred property ") at the time of the other transfer there mentioned (" the spouse transfer") there were substituted a reference to the market value of the property at that time or, in a case where subsection (2) below applies, to the lower market value mentioned in paragraph (c) of that subsection.
(2)This subsection applies where—
(a)the chargeable transfer is made after the spouse transfer ; and
(b)the transferred property either remains the property of the transferor's spouse (" the transferee ") at the date of the chargeable transfer, or has before that date been sold by the transferee by a qualifying sale; and
(c)the market value of the transferred property on the relevant date (that is to say, the date of the chargeable transfer or, as the case may be, of the qualifying sale) is lower than its market value at the time of the spouse transfer; and
(d)the transferred property is not tangible movable property.
(3)In this section " market value " and " qualifying sale " have the same meanings as in section 99 above; and, subject to subsection (4) below, Schedule 12 to this Act shall have effect for the purposes of this section as it has effect for the purposes of that section.
(4)In its application by virtue of subsection (3) above Schedule 12 to this Act shall have effect as if—
(a)references to the chargeable transfer were references to the spouse transfer; and
(b)references to the transferee's spouse were omitted; and
(c)references to section 99 above were references to this section.
120Excluded property: reversionary interests
(1)In section 24(3) of the [1975 c. 7.] Finance Act 1975, after paragraph (a) there shall be inserted—
“(aa)it is one to which either the settlor or his spouse is beneficially entitled ; or”.
(2)This section shall be deemed to have come into force on 16th April 1976, but shall not apply in relation to a reversionary interest under a settlement made before that date.
121Deeds of family arrangement, etc.
(1)In section 47 of the Finance Act 1975, after section (1) there shall be inserted—
“(1A)Where property comprised in a person's estate immediately before his death is settled by his- will and, within the period of two years after his death and before any interest in possession has subsisted in the property, a distribution payment (within the meaning of paragraph 6 of Schedule 5 to this Act) is made out of the property or an event occurs on the happening of which a capital distribution would (apart from this subsection) be treated as so made under paragraphs 6(2) or 15(3) of that Schedule, then—
(a)the making of the distribution payment shall not be a capital distribution, and paragraphs 6(2) and 15(3) shall have effect on the happening of the event as if the references in them to a capital distribution were references to a distribution payment, and
(b)this Part of this Act shall apply as if the will had provided that on the testator's death the property should be applied or held as it is applied by the distribution payment or held after the happening of the event.
(1B)Where a testator expresses a wish that property bequeathed by his will should be transferred by the legatee to other persons, and the legatee transfers any of the property in accordance with that wish within the period of two years after the death of the testator—
(a)the transfer shall not be a transfer of value, and
(b)this Part of this Act shall have effect as if the property transferred had been bequeathed by the will to the transferee.”.
(2)Subsection (1) above applies in relation to deaths before as well as after the passing of this Act, and shall have effect in relation to a death occurring after 9th December 1972 but before 13th March 1975 as if the references to the period of two years after the death were references to the period ending with 13th March 1977.
122Inheritance (Provision for Family and Dependants) Act 1975
(1)Where an order is made under section 2 of the [1975 c. 63.] Inheritance (Provision for Family and Dependants) Act 1975 in relation to any property forming part of the net estate of a deceased person, then, without prejudice to section 19(1) of that Act, the property shall for the purposes of capital transfer tax be treated as if it had on his death devolved subject to the provisions of the order.
(2)Where an order is made under section 10 of the said Act of 1975 requiring a person to provide any money or other property by reason of a disposition made by the deceased, then—
(a)if that disposition was a chargeable transfer and the personal representatives of the deceased make a claim for the purpose—
(i)tax paid or payable on the value transferred by that chargeable transfer (whether or not by the claimants) shall be repaid to them by the Board or, as the case may be, shall not be payable ; and
(ii)the rate or rates of tax applicable to the transfer of value made by the deceased on his death shall be determined as if the values previously transferred by chargeable transfers made by him were reduced by that value;
(b)the money or property shall be included in the deceased's estate for the purpose of the transfer of value made by him on his death.
(3)Where the money or other property ordered to be provided under the said section 10 is less than the maximum permitted by that section subsection (2)(a) above shall have effect in relation to such part of the value there mentioned as is appropriate.
(4)The adjustment in consequence of the provisions of this section or of section 19(1) of the said Act of 1975 of the tax payable in respect of the transfer of value made by the deceased on his death shall not affect—
(a)the amount of any deduction to be made under section 8 of that Act in respect of tax borne by the person mentioned in subsection (3) of that section ; or
(b)the amount of tax to which regard is to be had under section 9(2) of that Act;
and where a person is ordered under that Act to make a payment or transfer property by reason of his holding property treated as part of the deceased's net estate under section 8 or 9 and tax borne by him is taken into account for the purposes of the order, any repayment of that tax shall be made to the personal representatives of the deceased and not to that person.
(5)Tax repaid under paragraph (a)(i) of subsection (2) above shall be included in the deceased's estate for the purposes of the transfer of value made by him on his death; and tax repaid under that paragraph or under subsection (4) above shall form part of the deceased's net estate for the purposes of the said Act of 1975.
(6)A distribution payment made in compliance with an order under the said Act of 1975 shall not be a capital distribution; and where an order under that Act provides for property to be settled or for the variation of a settlement and, apart from this subsection—
(a)tax would be charged under paragraph 4(2) of Schedule 5 to the [1975 c. 7.] Finance Act 1975 on the coming into force of the order; or
(b)a capital distribution would be treated as made on that occasion under any other provision of the said Schedule 5,
the said paragraph 4(2) shall not apply and any such provision as is mentioned in paragraph (b) above shall apply as if it referred to a distribution payment instead of a capital distribution.
(7)In subsections (2)(a) and (5) above " tax " includes interest on tax.
(8)Tax overpaid or underpaid in consequence of subsection (1) above or of the said section 19(1) shall not carry interest for any period before the order there mentioned is made; and tax repayable on a claim under subsection (2) above shall carry interest (which shall not constitute income for any tax purposes) at the rate for the time being applicable under paragraph 19(1)(ii) of Schedule 4 to the Finance Act 1975 from the date on which the claim is made.
(9)This section applies in relation to deaths after 6th April 1976.
123Legitim
(1)Where a testator dies leaving a surviving spouse and a person under the age of 18 entitled to claim legitim, and provision is made in his will or other testamentary document for a disposition to his spouse which, if it could take effect, would leave insufficient property in the estate to satisfy the entitlement of that person in respect of legitim, the following provisions of this section shall apply.
(2)Subject to subsections (3) and (4) below, tax shall be charged at the testator's death as if the disposition to the spouse did not include any amount in respect of legitim, but if within the period mentioned in subsection (8) below the person or persons concerned renounce their claim to legitim, tax shall be repaid to the estate calculated on the basis that the disposition to the spouse did include the amount renounced, and the tax to be repaid shall carry interest at the rate for the time being set out in paragraph 19(1)(c)(i) of Schedule 4 to the [1975 c. 7.] Finance Act 1975 from the date on which the tax was paid.
(3)The executors or judicial factor of the testator may, in accordance with the provisions of this section, elect that subsection (2) above shall not apply but that subsection (4) below shall apply.
(4)Tax shall be charged at the testator's death as if the disposition to the spouse had taken effect, but where the person or persons concerned claim legitim within the period mentioned in subsection (8) below, tax shall be charged on the amount so claimed calculated on the basis that the legitim fund had been paid out in full at the testator's death (excluding any part of the fund renounced before any claim has been made) and the tax chargeable thereon had been apportioned rateably among the persons entitled to claim legitim (excluding any who have renounced as aforesaid) and the amount of tax charged shall carry interest at the rate mentioned in subsection (2) above as if paragraph 19(1)(b) of Schedule 4 to the Finance Act 1975 had applied.
(5)Section 8(3) and (4) of the [1894 c. 30.] Finance Act 1894 and section 25(5)(a) of the Finance Act 1975 shall not apply in relation to tax charged by virtue of subsection (4) above but the person liable in respect of that tax shall be the person who claims legitim and any person mentioned in section 25(5)(c) of that Act, and section 27(1) of that Act shall apply in relation to the person who claims legitim as it applies in relation to the personal representatives of a deceased person.
(6)Where within the period mentioned in subsection (8) below a person renounces his claim to legitim, that shall not be a transfer of value.
(7)Where the executors or judicial factor of the testator decide to make an election under subsection (3) above they shall give notice in writing of that election to the Board within two years from the date of death of the testator or such longer period as the Board may permit.
(8)For the purposes of subsections (2) and (4) above, a person shall be treated as having claimed legitim unless he has renounced his claim before attaining the age of 18 or he renounces his claim within two years of his attaining that age or such longer period as the Board may permit.
(9)Where a person dies before attaining the age of 18 or before making a renunciation under subsection (8) above the provisions of this section shall apply in relation to that person's executors or judicial factor as they would have applied in relation to that person if that person had attained the age of 18 with the substitution of the date of death of that person for the date on which a person attained that age, but where the executors or factor renounce a claim to legitim in respect of a person the amount renounced shall not be treated as part of that person's estate.
(10)Where subsection (2) above applies in relation to any estate, then notwithstanding anything in paragraph 24 of Schedule 4 to the [1975 c. 7.] Finance Act 1975 the Board may repay tax under that subsection without limit of time.
(11)Where subsection (4) above applies in relation to any estate, then notwithstanding anything in section 11 of the [1894 c. 30.] Finance Act 1894 or paragraph 25 of Schedule 4 to the Finance Act 1975 a certificate of discharge may be given under the said section 11 or the said paragraph 25 in respect of the whole estate, and notwithstanding anything in section 8(7) of the Finance Act 1894 or paragraph 23 of Schedule 4 to the Finance Act 1975 the giving of the certificate shall not preclude the Board from claiming tax under subsection (4) above without limit of time.
(12)In the case of a testator who died before 13th March 1975, any reference in this section to tax includes a reference to estate duty.
(13)This section has effect in relation to the estate of any testator who died after 12th November 1974 and extends to Scotland only.
124Acceptance of property in satisfaction of tax
In Schedule 4 to the [1975 c. 7.] Finance Act 1975, in paragraph 17(4), for paragraphs (a) and (b) there shall be substituted—
“(a)any picture, print, book, manuscript, work of art, scientific object or other thing which the Treasury are satisfied is pre-eminent for its national, scientific, historic or artistic interest;”.
125Double taxation relief
(1)For paragraph 8 of Schedule 7 to the Finance Act 1975 (unilateral double taxation relief) there shall be substituted—
“8(1)Where the Board are satisfied that in any territory outside the United Kingdom (an " overseas territory ") any amount of tax imposed by reason of any disposition or other event is attributable to the value of any property, then, if—
(a)that tax is of a character similar to that of capital transfer tax or is chargeable on or by reference to death or gifts inter vivos ; and
(b)any capital transfer tax chargeable by reference to the same disposition or other event is also attributable to the value of that property,
they shall allow a credit in respect of that amount (" the overseas tax") against that capital transfer tax in accordance with the following provisions.
(2)Where the property is situated in the overseas territory and not in the United Kingdom, the credit shall be of an amount equal to the overseas tax.
(3)Where the property—
(a)is situated neither in the United Kingdom nor in the overseas territory ; or
(b)is situated both in the United Kingdom and in the overseas territory,
the credit shall be of an amount calculated in accordance with the following formula—
where A is the amount of the capital transfer tax, B is the overseas tax and C is whichever of A and B is the smaller.
(4)Where tax is imposed in two or more overseas territories in respect of property which—
(a)is situated neither in the United Kingdom nor in any of those territories ; or
(b)is situated both in the United Kingdom and in each of those territories,
sub-paragraph (3) above shall apply as if, in the formula there set out, B were the aggregate of the overseas tax imposed in each of those territories and C were the aggregate of all, except the largest, of A and the overseas tax imposed in each of them.
(5)Where credit is allowed under sub-paragraph (2) above or paragraph 7 above in respect of overseas tax imposed in one overseas territory, any credit under sub-paragraph (3) above in respect of overseas tax imposed in another shall be calculated as if the capital transfer tax were reduced by the credit allowed under sub-paragraph (2) or paragraph 7; and where, in the case of any overseas territory mentioned in sub-paragraph (3) or (4) above, credit is allowed against the overseas tax for tax charged in a territory in which the property is situated, the overseas tax shall be treated for the purposes of those paragraphs as reduced by the credit.
(6)In this paragraph references to tax imposed in an overseas territory are references to tax chargeable under the law of that territory and paid by the person liable to pay it.
(7)Where relief can be given both under this paragraph and paragraph 7 above, relief shall be given under whichever paragraph provides the greater relief.”
(2)This section has effect in relation to dispositions and other events after 6th April 1976.