Finance Act, 1931


Death Duties.

Estate duty on property in which deceased had a life interest in case of transfer to a company.

26.—(1) Where at any time before the death of a person dying on or after the date of the passing of this Act any property in which the deceased had an estate or interest limited to cease at his death was transferred, whether before or after the passing of this Act and whether directly or indirectly and whether by one or more transactions, by the deceased and the person interested in the remainder or reversion to or for the benefit of a company to which this section applies, then unless—

(a) the transfer was made before the 1st day of August, 1918; or

(b) such property was settled property and the interest of the deceased would in any case have failed by reason of his death before it would have become an interest in possession; or

(c) the consideration payable to the deceased in respect of the transfer was wholly satisfied otherwise than by an allotment of shares in such company or the grant to the deceased by such company of an annuity terminable on or by reference to the death of the deceased or any other series of periodical payments similarly terminable; or

(d) the deceased—

(i) had at least three years before his death relinquished all interest in such property, and

(ii) had not at any time within the said three years the possession or enjoyment (otherwise than under a lease or an agreement for a lease at a rack rent) of any part of such property or of any benefit secured to him, whether by contract or otherwise, in relation to such relinquishment, and

(iii) was not at any time within the said three years in receipt of or entitled to any payment from the company, other than a payment in respect of or on account of debentures or loans or the payment of a capital sum of purchase money of fixed amount (including purchase money payable by periodical instalments for a definite period, but excluding purchase money payable by way of annuity or other periodical payments terminable on or by reference to the death of the deceased):

such property shall, subject to the provisions of this section, be deemed for the purposes of estate duty to pass on the death in like manner as if the estate or interest of the deceased therein had continued until the death.

(2) Where property which but for this sub-section would be deemed by virtue of the foregoing sub-section to pass on the death or any part of such property has during the lifetime of the deceased been bona fide sold or exchanged for full consideration in money or money's worth by the company to which it had been transferred within the meaning of the foregoing sub-section, such property or so much thereof as has been so sold or exchanged shall not be deemed to pass on the death of the deceased, but in lieu thereof, the property which, at the date of the death of the deceased, is or represents in the hands of the company the proceeds of such sale or exchange shall be deemed for the purpose of estate duty to pass on the death in like manner as if the deceased had an estate or interest therein limited to cease on his death and as if such estate or interest had continued until his death.

(3) In determining the value of any property deemed to pass on the death under this section, there shall be deducted from the principal value thereof—

(a) so much of such sum (if any) as has been borrowed by the company and has been applied by the company in the improvement of the property and has not at the death been repaid by the company;

(b) a sum equal to the capital sum of money (if any) paid by the company to the deceased as part of the consideration for the transfer of his interest in the property;

(c) where estate duty is payable in connection with the death on any shares of or debentures in the company, a sum equal to the principal value at the date of the death of such of those shares or debentures as were allotted or transferred to the deceased in consideration of the transfer of the property.

(4) The company concerned shall be accountable for any duty imposed by this section and shall, for the purpose of raising and paying that duty, have all the powers conferred on accountable persons by the Finance Act, 1894 , and if the duty or any part thereof is paid by the executor (within the meaning of that Act) of the deceased it shall be repaid to him by the company.

(5) Where on the death of any person a claim for duty arises by virtue of this section, the company accountable for such duty shall, within three months after such company becomes aware of such death, notify the Revenue Commissioners of the death of such person, and any such company wilfully failing to give such notification shall be liable to a penalty not exceeding five hundred pounds.

(6) The Revenue Commissioners may, for the purposes of carrying this section into effect, require any company to which this section applies to furnish to them within two months after being so required to do copies of such of the balance sheets and profit and loss or income and expenditure accounts, and such other particulars as they may reasonably require, and if any such company fails to comply with such requisition—

(a) such company shall be liable to a penalty not exceeding five hundred pounds, and every director, manager, secretary or other officer of such company who knowingly or wilfully authorises or permits the failure shall be liable to a like penalty; and

(b) an order may be made against all or any of the directors of such company requiring them to comply with such requisition in like manner as an order may be made against any person who is accountable for succession duty to deliver an account and the provisions of section 47 of the Succession Duty Act, 1853 , shall apply accordingly subject to the necessary modifications.

(7) In this section—

the expression “company to which this section applies” means any body corporate, wheresoever incorporated, which either—

(a) is so constituted as not to be controlled by its shareholders or by any class thereof, or

(b) has not issued to the public, or, in the case of a company which is about to make an issue of shares to the public, will not when it has made that issue, have issued to the public more than half of the shares by the holders whereof it is controlled;

the word “share” includes any interest whatsoever in a company, by whatsoever name it is called, analogous to a share, and the word “shareholders” shall be construed accordingly.