Finance Act 1971

Section 59.

SCHEDULE 12 Abolition of Charge on Death

Death not constituting disposal

1 For subsection (1) of section 24 of the Finance Act 1965 there shall be substituted the following subsection:—

“(1) For the purposes of this Part of this Act, the assets of which a deceased person was competent to dispose—

(a) shall be deemed to be acquired on his death by the personal representatives or other person on whom they devolve for a consideration equal to their market value at the date of the death ; but

(b) shall not be deemed to be disposed of by him on his death (whether or not they were the subject of a testamentary disposition)”.

2 At the end of subsection (9) of that section (construction of references to assets of which the deceased was competent to dispose) there shall be added the words “and include references to his severable share in any assets to which, immediately before his death, he was beneficially entitled as a joint tenant ”.

Donatio mortis causa not chargeable gain

3 Notwithstanding section 22(4) of the [1965 c. 25.] Finance Act 1965 no chargeable gain shall accrue to any person on his making a disposal by way of donatio mortis causa.

4 In section 45(1) of the Finance Act 1965, in the definition of “legatee ”, for the words from “and a donatio ” to “gift” there shall be substituted the words " and a person taking under a donatio mortis causa shall be treated (except for the purposes of section 24 of this Act) as a legatee and his acquisition as made at the time of the donor's death ".

5 In sub-paragraph (2) of paragraph 20 of Schedule 7 to the Finance Act 1965 (which makes exceptions to the rule that neither a gain nor a loss accrues on a disposal between husband and wife) the following shall be substituted for paragraph (b)—

“(b) if the disposal is by way of donatio mortis causa”.

Settled property

6 Where, by virtue of subsection (3) of section 25 of the Finance Act 1965, the assets forming part of any settled property are deemed to be disposed of and re-acquired by the trustee on the occasion when a person becomes absolutely entitled thereto as against the trustee, then, if that occasion is the termination of a life interest (within the meaning of that section) by the death of the person entitled to that interest—

(a) no chargeable gain shall accrue on the disposal; and

(b) if on the death the property reverts to the disponer the disposal and re-acquisition under that subsection shall be deemed to be for such consideration as to secure that neither a gain nor a loss accrues to the trustee, and shall, if the trustee had first acquired the property at a date earlier than 6th April 1965, be deemed to be at that earlier date.

7 In section 25(4) of the Finance Act 1965 (notional disposal of all assets of settled property on termination of life interest in all or part of settled property) for the words “all the assets forming part of the settled property, except any which at that time cease to be settled property” there shall be substituted the words “the whole or a corresponding part of each of the assets forming part of the settled property and not ceasing at that time to be settled property ” and for the words “their market value ” there shall be substituted the words " the whole or a corresponding part of the market value of the asset. "

8 At the end of the said section 25(4) there shall be inserted the following paragraph:—

“For the purposes of this subsection a life interest which is a right to part of the income of settled property shall be treated as a life interest in a corresponding part of the settled property”.

9 Where the said section 25(4) applies on the death of the person entitled to the life interest referred to therein, no chargeable gain shall accrue on the disposal deemed to be made under that section.

10 Subsections (3) and (4) of section 25 of the [1965 c. 25.] Finance Act 1965 shall apply, where an annuity which is not a life interest within the meaning of that section is terminated by the death of the annuitant, as they apply on the termination of a life interest by the death of the person entitled thereto.

11 Where a life interest (within the meaning of section 25 of the Finance Act 1965) in settled property is terminated by the death of a person on whose death estate duty falls to be charged on the property by virtue of section 2(1)(b) of the [1894 c. 30.] Finance Act 1894, then—

(a) if the value on which estate duty is so chargeable is not reduced under paragraph 3 of Part II of Schedule 17 to the [1969 c. 32.] Finance Act 1969 or paragraph 3 of Part II of Schedule 1 to the [1969 c. 18 (N.I.).] Finance Act (Northern Ireland) 1969 paragraphs 6 and 9 above shall apply as if that person had been entitled thereto at his death ; and

(b) if that value is so reduced by any percentage, any chargeable gain or allowable loss accruing on the disposal deemed to be made under section 25(3) or 25(4) of the Finance Act 1965 shall be reduced by the complementary percentage, that is to say the percentage found by subtracting the first-mentioned percentage from one hundred per cent.

12 In section 25 of the Finance Act 1965 the following shall be inserted after subsection (4)—

“(4A) Where, by virtue of section 2(1)(b) of the Finance Act 1894, estate duty is chargeable on any property comprised, at the time of a death, in settled property in a case where neither subsection (3) nor subsection (4) above applies, the appropriate portion of each of the assets forming part of the property so comprised shall for the purposes of this Part of this Act be deemed to be disposed of and immediately re-acquired at that time by the trustee for a consideration equal to the appropriate portion of the market value of the asset; but no chargeable gain shall accrue on the disposal. For the purposes of this subsection the appropriate portion is the value on which estate duty is so chargeable divided by the market value of the whole of the settled property at the time of the death.”

13 Section 31(3)(b) of the [1965 c. 25.] Finance Act 1965 (concession on certain notional disposals of settled property) shall not apply in relation to a disposal on which by virtue of this Schedule no chargeable gain or allowable loss accrues to the trustee.

Gifts

14 (1) After section 25 of the Finance Act 1965 there shall be inserted the following section:—

“25A Gifts subject to estate duty.

(1) Where on the death of a person, estate duty falls to be charged, by virtue of section 2(1)(c) of the [1894 c. 30.] Finance Act 1894, on an asset comprised in a gift inter : vivos, and at the time of the death the asset—

(a) is owned by the donee ; or

(b) is property settled by the gift or property which for the purposes of section 38 of the [1957 c. 49.] Finance Act 1957 or section 1 of the [1957 c. 15 (N.I.).] Finance Act (Northern Ireland) 1957 is by virtue of subsection (9) thereof treated as property settled by the gift,

then, subject to subsection (2) below, the asset shall for the purposes of this Part of this Act be deemed to be disposed of and immediately re-acquired at that time by the donee or trustee for a consideration equal to its market value ; but no chargeable gain shall accrue on the disposal.

(2) Where the value on which estate duty is so chargeable is reduced under section 35 of the [1968 c. 44.] Finance Act 1968 or section 1 of the [1968 c. 17 (N.I.).] Finance Act (Northern Ireland) 1968 the appropriate portion only of the asset shall be deemed to be so disposed of and re-acquired and the consideration shall be deemed to be equal to the appropriate portion of the market value of the asset.

For the purposes of this subsection the appropriate portion is the value on which estate duty is chargeable divided by the market value of the asset at the time of the death.”

(2) Section 42(3) of the [1966 c. 18.] Finance Act 1966 shall cease to have effect.

Market value determined for estate duty

15 For section 26 of the Finance Act 1965 there shall be substituted the following section:—

“26 Market value determined for estate duty.

(1) Where estate duty is chargeable in respect of any property passing on a death and the principal value of an asset forming part of that property has been ascertained (whether in any proceedings or otherwise) for the purposes of that duty, the principal value so ascertained shall be taken for the purposes of this Part of this Act to be the market value of that asset at the date of the death.

(2) Where the principal value has been reduced under section 35 of the [1968 c. 44.] Finance Act 1968 or section 1 of the [1968 c. 17 (N.I.).] Finance Act (Northern Ireland) 1968, the reference in subsection (1) above to the principal value as ascertained for the purposes of estate duty is a reference to that value as so ascertained before the reduction.”

Insolvents' assets

16 In paragraph 10(2)(b) of Schedule 10 to the [1966 c. 18.] Finance Act 1966 for the words “disposed of by the deceased ” there shall be substituted the words “acquired by the persons on whom they devolve ”.

Death of heir of entail or proper liferenter

17 In paragraph 4 of Schedule 12 to the Finance Act 1968—

(a) in sub-paragraph (1) for the words “charging of capital gains tax on the death ” there shall be substituted the words “consequences of the death ”;

(b) in sub-paragraph (2) paragraph (a) and, in paragraph (b), the words from “(i) in the case ” to “those assets ” shall be omitted ; and

(c) sub-paragraphs (3) to (9) shall be omitted.

Northern Ireland estate duty

18 In paragraphs 11, 12, 14 and 15 of this Schedule references to estate duty include references to estate duty leviable under the law of Northern Ireland.