Finance Act 1968

4 (1) The provisions of Part III of the Finance Act 1965, so far as relating to the charging of capital gains tax on the death after 19th March 1968 of an heir of entail in possession of any property in Scotland subject to an entail, whether sui iuris or not, or of a proper liferenter of any property, shall have effect subject to the following provisions of this paragraph.

(2) For the purposes of the said Part III, on the death of any such heir or liferenter—

(a) the deceased shall be deemed not to have been a person competent to dispose of the entailed or, as the case may be, liferented property;

(b) the heir of entail next entitled to the entailed property under the entail (hereafter in this paragraph called " the next heir") or, as the case may be, the person (if any) who, on the death of the liferenter, becomes entitled to possession of the property as fiar (hereafter in this paragraph called " the fiar ") shall be deemed to have acquired all the assets forming part of the property—

(i) in the case of the next heir, at the date on which the deceased succeeded to the property under the entail,

(ii) in the case of the fiar, at the date on which the instrument under which the deceased was entitled to his liferent came into operation so as to create a liferent of the property,

for a consideration equal to their market value at that date, and to have disposed of, and immediately reacquired, those assets at the date of the deceased's death for a consideration equal to their market value at that date.

(3) Section 21 of the [1965 c. 25.] Finance Act 1965 (alternative charge to capital gains tax) shall not apply in relation to the charging of capital gains tax on gains accruing in consequence of sub-paragraph (2)(b) above.

(4) Section 25(5) of the Finance Act 1965 (under which, in the case of the death of any individual, the relief provided for by section 24(2) of that Act in respect of capital gains tax chargeable on gains accruing in consequence of section 24(1) of that Act may in certain circumstances become available to the trustees of a settlement) shall, in a case where the deceased was such an heir of entail or life-renter as aforesaid, have effect, for the purpose of making that relief available to the next heir or, as the case may be, the fiar as well as to any such trustees, as if references—

(a) to the trustees of a settlement, or to a body of trustees,

included references to the next heir or, as the case may be, the fiar,

(b) to settled property included references to the property of which the deceased was the heir of entail in possession or, as the case may be, the liferenter,

(c) to the disposal of settled property deemed to be effected in accordance with subsection (3) or subsection (4) of the said section 25 on the termination of a life interest by the death, or otherwise in consequence of the death, included references to the disposal of the property deemed to be effected in accordance with sub-paragraph (2)(b) above,

and subject to any other necessary modification.

(5) In the case of the death of any such heir or liferenter, section 29 of the Finance Act 1965 (private residences) shall, subject to all necessary modifications, apply in relation to a gain accruing in consequence of sub-paragraph (2)(b) above to the next heir or fiar on the disposal of an asset deemed to be effected in accordance with that sub-paragraph, being an asset within subsection (1) of the said section 29, where the dwelling-house or part of a dwelling-house mentioned in that subsection was the only or main residence of the deceased.

(6) Where on the death of any such heir the next heir becomes chargeable to capital gains tax on gains accruing in consequence of sub-paragraph (2)(b) above, he shall, for the purpose of paying that tax or of recovering the amount of the tax if he has already paid it, have the like right to sell or charge the entailed property or any part of it as he would have had if the tax had been estate duty leviable on the property.

(7) Paragraph 4 of Schedule 10 to the [1965 c. 25.] Finance Act 1965 (postponement of payment of tax) shall have effect as if—

(a) after sub-paragraph (1)(b) there were inserted the following words— “or

(c) on the disposal of any property deemed to be effected on any occasion in accordance with paragraph 4(2)(b) of Schedule 12 to the Finance Act 1968,”; and

(b) in sub-paragraph (1), after the word " trustees " there were inserted the words " or, in a case falling within head (c) of this sub-paragraph, of the next heir or of the fiar, ".

(8) In estimating, for the purposes of estate duty, the value of any-property passing on the death of any such heir or liferenter, being property of which, by virtue of sub-paragraph (2)(b) above, the next heir or, as the case may be, the fiar is deemed to have disposed at the date of the deceased's death, allowance shall be made for any capital gains tax chargeable on gains accruing in consequence of the said sub-paragraph 2(b) on that death in respect of that property.

(9) This paragraph (except sub-paragraph (8) thereof) shall be construed as one with Part III of the Finance Act 1965, and sub-paragraph (8) shall be construed as one with Part I of the [1894 c. 30.] Finance Act 1894.