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22 1965

FINANCE ACT, 1965

PART III.

Death Duties.

Dispositions in favour of certain companies, etc.

20. —(1) In this section—

company” means a body corporate (wherever incorporated)—

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

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

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

company controlled by the deceased” means a company which was under the control of any one or more of the deceased, the relatives of the deceased, nominees of the deceased, or nominees of the relatives of the deceased—

(a) in a case in which the deceased died two years or more after the passing of this Act, within the period of five years before the death;

(b) in any other case, within the period commencing three years before the passing of this Act and ending at the death;

control” means, in relation to a body corporate, the power of a person to secure, by means of the holding of shares or the possession of voting power in or in relation to that or any other body corporate, or by virtue of any powers conferred by the articles of association or other document regulating that or any other body corporate, that the affairs of the first-mentioned body corporate are conducted in accordance with the wishes of that person;

deceased” means a person who dies after the passing of this Act;

disposition” has the same meaning as in section 27 and section 32 of the Finance Act, 1941 , and also includes a payment of money;

income” in relation to a company includes profits arising from trade;

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

non-trading company” means a company the income whereof in the twelve months preceding the death of the deceased consisted mainly of income which, if the company were an individual, would not be earned income as defined in subsection (3) of section 14 of the Income Tax Act, 1918;

relative” means a husband or wife, ancestor, lineal descendant, or brother or sister or descendant of a brother or sister.

(2) For the purposes of this section—

(a) a company shall be deemed to be under the control of not more than five persons if any five or fewer persons together exercise, or are able to exercise, or are entitled to acquire, control, whether direct or indirect, of the company and for this purpose persons who are relatives of one another, persons who are nominees of any other person together with that other person, persons in partnership and persons interested in any shares or obligations of the company which are subject to any trust or are part of the estate of a deceased person shall respectively be treated as a single person, and

(b) a company which is controlled by any one or more of the deceased and relatives of the deceased shall be regarded as being itself a relative of the deceased.

(3) (a) Where the deceased has, either before or after the passing of this Act, made a disposition of property in favour of a company controlled by the deceased, the property shall, for all purposes of estate duty, be deemed to be property taken by the company under a disposition operating as an immediate gift inter vivos within the meaning of paragraph (c) of subsection (1) of section 2 of the Finance Act, 1894, and any consideration received by the deceased in relation thereto shall not be treated as consideration for the purpose either of section 3 of the Finance Act, 1894, or of subsection (1) of section 7 of that Act.

(b) Where the consideration received by the deceased for a disposition to which paragraph (a) of this subsection applies and which was made within five years of his death, or property representing such consideration, is liable to estate duty in connection with his death, the following provision shall have effect: In determining the value for estate duty purposes of the property taken under the disposition there shall be deducted, from the value which would be liable to duty if this paragraph had not been enacted, the value on which estate duty is payable of the consideration or of the property representing the consideration.

(4) (a) Where—

(i) the deceased had at any time, whether before or after the passing of this Act, made a disposition of property in favour of a company controlled by the deceased, and

(ii) he was at any time within five years of his death in receipt or enjoyment of income or benefits from the company other than dividends or interest on stock, shares, or debentures of the company,

he shall be deemed to have had an interest ceasing on his death in the net assets of the company within the meaning of paragraph (b) of subsection (1) of section 2 of the Finance Act, 1894, with the exclusion from that paragraph of the words “holder of an office, or”.

(b) The interest to which paragraph (a) of this subsection refers shall be deemed to be an annuity equivalent to the average annual amount received or enjoyed by way of income or benefits in the relevant period, that is to say, the period of five years immediately preceding the death of the deceased and in relation to the said interest the following provisions shall apply:

(i) where the benefits enjoyed consist of or include the occupation or possession of lands or chattels, the value of the occupation or possession shall be determined in the same manner as the value of similar benefits is determined under the provisions of subsection (5) of section 21 of this Act;

(ii) where the income or benefits purport to be or to include remuneration for services rendered by the deceased to the company, the Revenue Commissioners shall deduct from the said average annual amount such sum as appears to them to be reasonable remuneration in all the circumstances of the case.

(c) In the application of subsection (7) of section 7 of the Finance Act, 1894, to the cesser of an interest to which paragraph (a) of this subsection refers—

(i) the annual net income of the company shall be deemed to be the average of the total net income received in all accounting years or parts of accounting years falling within the relevant period referred to in paragraph (b) of this subsection;

(ii) the net value of the assets of the company shall be computed by deducting, from the principal value of the gross assets of the company at the date of death of the deceased, the liabilities of the company other than debts or liabilities due to a relative of the deceased which were not bona fide incurred for full consideration in money or money's worth given by the relative to the company.

(5) Where there pass on a death securities, whether stock or shares or debentures, in a non-trading company which is a company controlled by the deceased, the value, for all purposes of death duties, of the securities shall be such sum as would have been payable in respect of them to their owner if the company had been voluntarily wound up and all the assets realised on the date in relation to which the value is to be determined.

Where the assets of the company include securities of a second non-trading company, the value shall be ascertained on the basis that the second company is also voluntarily wound up and its assets realised on the relevant date, and if the assets of the second company include securities of a third non-trading company, the value shall be ascertained on the basis that the third company is also voluntarily wound up and its assets realised on the relevant date, and so on.

In determining such sum, no allowance shall be made for the costs of winding up any company or of realising its assets.

(6) Where any one or more of the deceased and relatives of the deceased had, directly or indirectly, control of a company by reason of the ownership of shares—

(a) in a case in which the deceased died two years or more after the passing of this Act, within the period of five years before the death,

(b) in any other case, within the period commencing three years before the passing of this Act and ending at the death,

the value of each such share passing or deemed to pass on the death of the deceased under his will or intestacy or by reason of a disposition made by him shall, for all purposes of death duties, be determined as if it formed part of a group of shares sufficient in number to give to the owner of the group control of the company.

(7) Where amongst the property passing on a death there is included a debt due to the deceased by a company controlled by the deceased, the value of the debt for all purposes of death duties shall be determined on the basis that the debt was immediately payable on the date in relation to which the value is to be ascertained.

(8) A disposition to or for the benefit of a relative of the deceased made by a company controlled by the deceased, where at the time of the disposition or at any time within a period of one year prior thereto the deceased alone had control of the company, shall, for all purposes of death duties, be deemed to be a disposition made by the deceased to or for the benefit of the relative, and any consideration for the disposition given to the company shall be deemed to be consideration given to the deceased in relation to the disposition so deemed to be made by him.

Discretionary trusts.

21. —(1) In this section—

beneficiary” means a person who is an object of the trust referred to in subsection (2) of this section;

market value” means the price which, in the opinion of the Revenue Commissioners, the property to which subsection (5) of this section relates would fetch if sold in the open market;

payment” includes any disposition of property in favour of a beneficiary;

relevant period” means, in relation to a deceased person, the period of five years prior to the date of his death or the period from the date of the commencement of the discretionary trust up to the date of his death, whichever is the shorter.

(2) Where property is vested in a trustee upon trusts under which the income or capital of the property may be paid to one or more of a number or of a class of persons as the trustee or any other person may, at his discretion, select and one or more of those persons dies or die during the continuance of the discretionary trust and after the passing of this Act, any person so dying shall, for all purposes of estate duty, be deemed to have had an interest limited to cease on his death in the property.

(3) The interest to which subsection (2) of this section refers shall be deemed to have been an annuity equivalent to the average annual amount of the aggregate of all payments made out of the capital or income of the property to the deceased person or received or enjoyed by him during the relevant period or made to or received or disposed of by any other person on his behalf during that period, subject however to the following subsections of this section.

(4) A payment out of the capital of the trust property shall not be treated as a payment for the purpose of subsection (3) of this section save where there is a trust or power to accumulate income as an addition to the capital of the trust property and then only to the extent to which the payment does not exceed the amount of income accumulated to the date of such payment.

(5) If at any time during the relevant period the deceased person had been in occupation or possession of land or chattels subject to the discretionary trust otherwise than for full consideration in money or money's worth given by him and, after the termination of the occupation or possession, the land or chattels, or property representing the land or chattels, continues to be subject to the discretionary trust, the following provision shall have effect for the purpose of determining the amount of the annuity referred to in subsection (3) of this section:

For each year or part of a year during which the deceased person was the only beneficiary in occupation or possession, the occupation or possession shall be deemed to have been a payment of income at the annual rate of six per cent. of the market value of the land or chattels (as the case may be) at the date of the termination of the occupation or possession. For each year or part of a year during which a number of beneficiaries including the deceased person was in occupation or possession, the deceased person's occupation or possession shall be deemed to have been a payment of income at an annual rate of six (divided by the number of beneficiaries including the deceased person) per cent. of such market value.

(6) In relation to property in which an interest is by this section deemed to have subsisted, paragraph (b) of subsection (1) of section 2 of the Finance Act, 1894, shall have effect as if the words “holder of an office, or” were omitted.

Amendment of section 2 (2) of Finance Act, 1894.

22. —(1) In this section “the Principal Act” means the Finance Act, 1894.

(2) The exemption from estate duty applicable by virtue of subsection (2) of section 2 of the Principal Act shall not apply to property other than land situate out of the State which, by the law of the country in which it is situate, is or is deemed to be immovable property and which passes or is deemed to pass on a death occurring after the passing of this Act where either—

(a) the death is that of a person dying domiciled in the State and the property passes under his will or intestacy or by survivorship or is deemed to pass by reference to being the subject matter of a gift inter vivos made, whether before or after the passing of this Act, by him, or

(b) the property passes or is deemed to pass under or by virtue of a disposition made, whether before or after the passing of this Act, by a person who, at the date when the disposition took effect, was domiciled in the State or in the area now comprised in the State or under a disposition made, whether before or after the passing of this Act, directly or indirectly, on behalf of or at the expense of or out of funds provided by a person who at the said date was domiciled as aforesaid.

(3) Paragraph (b) of subsection (2) of this section shall not apply in relation to the death of the disponer where—

(a) the disponer dies domiciled outside the State, and

(b) the disposition constitutes an immediate gift inter vivos made, whether before or after the passing of this Act, by him.

(4) As respects property to which subsection (2) of this section applies, the following provisions shall have effect:

(a) the proviso to subsection (5) of section 7 of the Principal Act and subsection (3) of section 60 of the Finance (1909-10) Act, 1910, shall not apply;

(b) where the deceased was competent to dispose of such property within the meaning of the Principal Act, his executor (as defined by paragraph (d) of subsection (1) of section 22 of that Act) shall, in addition to any other person, be accountable for the duty and subsection (4) of section 8 of the Principal Act shall have effect as if the words referring to the executor not being accountable were omitted;

(c) the charge for duty thereon by virtue of subsection (1) of section 9 of the Principal Act shall extend to assets which form the proceeds of any disposition of the property or otherwise for the time being directly or indirectly represent it and the proviso to that subsection and any other enactment relating to the charge imposed under that section shall have effect accordingly.

Extension of section 30 of Finance Act, 1941, etc.

23. —(1) Where, after the passing of this Act, a person who has an interest in property limited to cease on a death as defined by section 27 of the Finance Act, 1941 , acquires the property or all or any other interests therein, the acquisition shall be deemed to be a determination of the interest so limited to cease as aforesaid, within the meaning of section 30 of that Act.

(2) Where an acquisition to which subsection (1) of this section relates has, by way of purchase within five years of the death whereon the interest was limited to cease, been made either by the deceased or out of or by means of any property which would have passed or have been deemed to pass on his death if he had died immediately before the said purchase, then, a sum of money equivalent to the consideration given for the purchase shall be deemed for all purposes of estate duty to be property taken under a disposition made by the deceased within five years of his death purporting to operate as a gift inter vivos to the person from whom the purchase was made.

(3) Where—

(a) at any time after the passing of this Act and within five years before a death, being a time when there was in any property an interest limited to cease on the death as defined in section 27 of the Finance Act, 1941 , a purchase of another interest in that property expectant on or subject to the interest so limited has been made either by the deceased or out of or by means of any property which would have passed for the purposes of estate duty on his death if he had died immediately before the purchase,

(b) the other interest passes or is deemed to pass or would, but for the provisions of this subsection, so pass or be deemed to pass on the death for the purposes of estate duty, and

(c) subsection (1) of this section does not apply to the purchase of the other interest,

there shall be deemed to be included in the property passing on the death in lieu of and substitution for the said other interest a sum of money equivalent to the consideration given for the purchase and the said other interest shall be excluded from the property so passing.

(4) Where the interest limited to cease on a death to which subsection (1) or paragraph (a) of subsection (3) of this section applies is such that on the cesser of that interest the property in which it subsisted is to be treated for the purposes of estate duty as passing to a particular or limited extent only then the consideration for the purchase to which subsection (2) of this section or the said paragraph (a), as the case may be, refers shall be treated for the purpose of this section as reduced to a corresponding extent.

(5) A sum of money which under this section is deemed to pass on a death shall, for the purposes of subsection (10) of section 7 of the Finance Act, 1894, be treated as distinct from any other property passing or deemed to pass on the death.

(6) Any property or any interest therein which was the subject matter of an acquisition to which the foregoing subsections apply shall not, in relation to any other property passing or deemed to pass on the death, be regarded as consideration within the meaning of section 3 of the Finance Act, 1894.

Benefits accruing pursuant to superannuation schemes.

24. —(1) (a) The provisions of this subsection shall have effect in relation to a death benefit payable under a non-contributory superannuation scheme.

(b) A death benefit shall be deemed—

(i) for all purposes of estate duty to be an interest purchased or provided by the deceased and to pass by reason of a disposition made by him,

(ii) for all purposes of succession duty to be a succession derived from the deceased as predecessor and from no other person.

(c) Where a death benefit is payable to all or any one or more of a class of persons, each such person shall be deemed to have become entitled on the death to all payments made to him notwithstanding that a power of appointment, selection or nomination in respect of the payments was vested in any person.

(d) (i) Where the aggregate value of all death benefits payable on a death does not exceed £5,000, the benefits shall, to the extent to which they become payable to or for the benefit of the widow or the dependent children of the deceased, be exempt from estate duty.

(ii) Where the aggregate value of death benefits payable on a death to or for the benefit of the widow or dependent children of the deceased exceeds £5,000, the estate duty chargeable in respect of such benefits shall not exceed the sum by which such value exceeds £5,000, but no reduction under this paragraph of the duty chargeable on a death benefit shall effect any reduction of the estate duty on other property under subsection (1) of section 13 of the Finance Act, 1914, or paragraph (b) of subsection (2) or subsection (3) of section 13 of the Finance Act, 1955 .

(e) In a case in which a death benefit consists of property other than money, any references in this section to a benefit being payable or to payments shall be construed accordingly.

(f) In this subsection—

death benefit” means any benefit which accrues pursuant to a superannuation scheme on or in connection with a death, occurring after the passing of this Act, during service or after retirement;

the deceased” means the person on or in connection with whose death a death benefit accrues;

dependent child” means a child (including a child adopted under the provisions of the Adoption Acts, 1952 and 1964) who had not attained the age of sixteen years at the date of the death of the deceased or who was then receiving full time instruction at any university college, school or other educational establishment;

non-contributory”, in relation to a superannuation scheme, means that no monetary contribution has been made to the scheme by the deceased;

superannuation scheme” includes any arrangement connected with employment;

employment” includes employment as a director of a body corporate.

(2) (a) The provisions of paragraph (d) of subsection (1) of this section shall apply to death benefits payable under a superannuation scheme other than a non-contributory superannuation scheme, to or for the benefit of the widow or dependent children of the deceased.

(b) In this subsection “death benefits”, “superannuation scheme”, “non-contributory”, “dependent children” and “the deceased” have the same meanings as in subsection (1) of this section.

Cesser of proviso to section 4 of Finance Act, 1894, except with respect to certain property.

25. —(1) The proviso to section 4 of the Finance Act, 1894, shall cease to have effect as regards property which passes or is deemed to pass on a death occurring after the passing of this Act.

(2) Subsection (1) of this section shall not apply to property as to which it is proved to the satisfaction of the Revenue Commissioners that it did not pass and is not deemed, by this or any other Act, to pass under or as a consequence, direct or indirect, of a disposition made by the deceased.

(3) For the purposes of this section “disposition” includes a payment of money.

Provisions relating to certain policies of assurance.

26. —In relation to a policy of assurance to which subsection (1) of section 11 of the Customs and Inland Revenue Act, 1889, applies and which was indefeasibly vested in a donee before the commencement of the period (in this section referred to as the revelant period) of five years ending at the death of the assured, the following provisions shall have effect if the assured dies after the passing of this Act:

(a) a part of the money received under the policy shall be excluded from the property passing or deemed to pass on the death of the assured and that part shall consist of:

(i) so much of that money as is equal to the price which, in the opinion of the Revenue Commissioners, the policy would have fetched if sold in the open market on the commencement of the relevant period, and

(ii) if any of the premiums paid on the policy during the relevant period were premiums not paid by the assured, so much of the balance of that money as bears to the whole of that balance the same proportion as the total of those premiums bears to the total of all the premiums paid on the policy during the relevant period;

(b) such part of the money received under the policy as remains after the exclusion under the foregoing paragraph shall be treated for all purposes of estate duty as made up of or including the gifts deemed under the next paragraph to have been made by the assured to the donee,

(c) the assured shall be deemed to have made, on each date during the relevant period on which he paid a premium on the policy, a gift to the donee of so much of the part referred to in the foregoing paragraph of the money received under the policy as bears to the whole of that part the same proportion as the premium bears to the total of all the premiums paid by the assured on the policy during the relevant period.

Amendment of section 59 of Finance (1909-10) Act, 1910, and certain other enactments.

27. —(1) In subsection (1) of section 59 of the Finance (1909-10) Act, 1910, “five years” is hereby substituted for “three years” in both places where the latter words occur.

(2) In subsection (2) of section 59 of the Finance (1909-10) Act, 1910 “five hundred pounds” is hereby substituted for “one hundred pounds”.

(3) In—

(i) paragraph (e) of subsection (1) of section 2 of the Finance Act, 1894,

(ii) paragraph (b) of subsection (3) of section 24 of the Finance Act, 1940 ,

(iii) subsection (4) of section 25 of that Act,

(iv) subsection (2) of section 30 of the Finance Act, 1941 ,

(v) subsection (1) of section 24 of the Finance Act, 1961 , and

(vi) paragraph (b) of subsection (3) of that section, “five years” is hereby substituted for “three years”.

(4) In determining, for estate duty purposes, the value of any property which is deemed to pass on a death—

(a) as property taken under a disposition purporting to operate as an immediate gift inter vivos within the meaning of paragraph (c) or paragraph (e) of subsection (1) of section 2 of the Finance Act, 1894, or

(b) under the provisions of subsection (1) of section 30 of the Finance Act, 1941 ,

being a death taking place in the third, fourth or last year of the five-year period, the principal value of the property shall be reduced—

(i) by fifteen per cent. thereof, if the death takes place in the third year,

(ii) by thirty per cent., if the death takes place in the fourth year,

(iii) by sixty per cent., if the death takes place in the fifth year.

In this subsection “the five-year period” means the period of five years beginning with the relevant disposition of property or the relevant disposition or determination of the limited interest, as the case may be.

(5) Where, for estate duty purposes, the aggregate value or amount of gifts made to a donee within five years prior to the death of the donor exceeds £500, the estate duty chargeable in respect of the gifts shall not exceed the sum by which such value or amount exceeds £500, but no reduction under this subsection of the duty chargeable on a gift shall affect any reduction of the estate duty on other property under subsection (1) of section 13 of the Finance Act, 1914, or paragraph (b) of subsection (2) or subsection (3) of section 13 of the Finance Act, 1955 .

(6) This section shall have effect only in cases in which the deceased dies after the passing of this Act and the relevant disposition, surrender, assurance, divesting, determination or other transaction was made or effected after or within three years before such passing.

Amendment of section 59 (2) of Finance (1909-10) Act, 1910, section 27 (a) of Finance Act, 1938, and section 24 (3) (a) of Finance Act, 1961.

28. —In relation to a disposition or gift made, whether before or after the passing of this Act, by a person dying after such passing—

(i) subsection (2) of section 59 of the Finance (1909-10) Act, 1910,

(ii) paragraph (a) of section 27 of the Finance Act, 1938 , and

(iii) paragraph (c) of subsection (3) of section 24 of the Finance Act, 1961 ,

shall be read as if there were inserted in each immediately after the word “marriage” the words “to or for the benefit of a party to the marriage or of issue of the marriage”.

Abatement of estate duty.

29. —(1) In this section—

benefit” means all property and all interests in property passing or accruing to a dependant on the death of the deceased in respect of which estate duty is payable;

child” means a child (including a child adopted under the provisions of the Adoption Acts, 1952 and 1964) of the deceased who was living at his death and who had not then attained the age of sixteen years or who was then receiving full time instruction at any university college, school or other educational establishment;

deceased” means a person dying after the passing of this Act domiciled in the State;

dependant” means the widow or child;

widow” except in subsection (4), means the widow of the deceased,

(2) Where the widow is the only dependant entitled to a benefit on the death of the deceased, any estate duty payable in respect of such benefit shall be abated by the sum of £250 together with a sum of £150 in respect of each child.

(3) Where more than one dependant, including the widow, are entitled to benefits, any estate duty payable in respect of such benefits shall be abated by the following amounts:

(a) in relation to the widow's benefit, by a sum of £250 together with a sum of £150 for each child not entitled to a benefit;

(b) in relation to a child's benefit, by the sum of £150.

(4) In a case where the deceased is a widow, any estate duty payable in respect of a benefit shall be abated by the sum of £150.

(5) Subsections (2) to (4) of this section shall have effect subject to the proviso that—

(a) in a case in which the amount of a benefit is not affected by a liability to estate duty arising in connection with the death of the deceased, no abatement shall be made under those subsections in respect of that benefit;

(b) in a case in which the amount of a benefit is affected by such a liability and the extent to which it is so affected is of an amount which is less than such abatement under those subsections in respect of the benefit as would be appropriate apart from this paragraph, the abatement under those subsections in respect of the benefit shall be reduced to that amount.

(6) Subsections (2) to (5) of this section shall have effect subject to the proviso that they shall not apply where the net value of all property passing or deemed to pass on the death of the deceased in respect of which estate duty is payable exceeds £15,000.

Abolition of legacy and succession duty in certain cases.

30. —(1) The legacy and succession duty payable at the rate of one per cent. and the additional succession duty at the rate of ten shillings per cent. shall not be chargeable on a legacy derived from a testator or intestate dying after the passing of this Act or on a succession conferred after such passing.

(2) For the purposes of this section “legacy” includes residue and share of residue.

(3) The foregoing provisions of this section shall not operate to prevent the grant of an exemption which would be lawful if this section had not been enacted.