Finance Act 1944

Relaxation of provisions as to purchases of annuities from relatives.

40 Relaxation of provisions of Finance Act, 1940, as to purchases of annuities, &c., from relatives.

(1) Subject to the provisions of this section, the relief specified therein shall be granted where, on the death of a person who has made a disposition of property in favour of a relative of his or a company (hereafter in this section referred to as "the disposition"), any estate duty becomes, or would but for this section become, payable by virtue of section forty-four of the Finance Act, 1940 (which relates to purchases of annuities or other interests from relatives).

(2) The sum on which estate duty would be payable apart from this section on the death in respect of the property which was the subject matter of the disposition or in respect of the property liable to a debt or incumbrance created by the deceased which was the subject matter of the disposition, as the case may be, shall first be computed and, subject to the limitations provided for by subsection (3) of this section, there shall then be allowed as a deduction from that sum—

(a) the amount, if any, by which the aggregate of the payments which have been made on account of the annuity or other interest for the period from the date when the annuity or other interest began to accrue in favour of the deceased until his death, exceeds the aggregate of the income derived from the deceased by virtue of the disposition for the period from the date of the disposition until his death ; and

(b) simple interest on so much, if any, of the amount aforesaid, and for such period, as, in the opinion of the Commissioners, is in all the circumstances just, at the rates from time to time payable during that period on death duties in arrear.

In this subsection, the expression " the aggregate of the income derived from the deceased by virtue of the disposition " means—

(i) in relation to so much of the property which was the subject matter of the disposition as did not consist of a debt or incumbrance created by the deceased, such amount as, in the opinion of the Commissioners, is in all the circumstances equal to a reasonable return from the property ; and

(ii) in relation to so much of the property which was the subject matter of the disposition as did consist of a debt or incumbrance created by the deceased, the aggregate amount of the interest paid or payable by the deceased in respect of that debt or incumbrance.

(3) The amount to be allowed as a deduction under subsection (2) of this section shall, in the circumstances specified in the provisions of the Third Schedule to this Act, be limited to the extent specified in those provisions respectively.

In the said Schedule, the expression " the disposition " has the same meaning as in this section, the expression " the annuity payments " means the payments specified in paragraph (a) of subsection (2) of this section, and the expression " the amount allowed " means the amount to be allowed as a deduction under this section.

(4) In this section, the expressions " relative " and " annuity " have the meanings assigned to them by section forty-four of the Finance Act, 1940, and sections fifty-eight and fifty-nine of that Act shall apply for the interpretation of this section and the said Third Schedule as they apply for the interpretation of Part IV of that Act.