Finance Act 1975

• (4) On an appeal before the Special Commissioners, the Special Commissioners may allow the appellant to put forward any ground of appeal not specified in the notice of appeal and may take it into consideration if satisfied that the omission was not wilful or unreasonable.

• (5) The Special Commissioners shall on an appeal to them confirm the determination appealed against unless they are satisfied that the determination ought to be varied or quashed.

Statement of case for opinion of High Court

10

• (1) Within thirty days of the determination by the Special Commissioners of an appeal under this Schedule any party to the appeal may question the determination on a point of law by a written request to the Special Commissioners to state and sign a case for the opinion of the High Court.

• (2) A request for a case under this paragraph shall be accompanied by a fee of £1 and any such case shall set forth the facts and the determination of the Commissioners.

• (3) A party requiring a case to be stated under this paragraph shall, within thirty days of receiving it, send it to the High Court and shall at or before the time of sending it to the High Court send a copy of it to every other party.

• (4) The High Court shall hear and determine any question of law arising on the case and may reverse, affirm or amend the determination of the Special Commissioners or make such other order as the court thinks fit.

• (5) The High Court may cause the case to be sent back for amendment, and the special Commissioners shall amend it accordingly.

• (6) This paragraph shall have effect—

• (a) in its application to Scotland, with the substitution of references to the Court of Session for references to the High Court; and

• (b) in its application to Northern Ireland, with the substitution of references to the Court of Appeal in Northern Ireland for references to the High Court.

Inspection for the purposes of valuation

11

• (1) If the Board authorise any person to inspect any property for the purpose of ascertaining its value for the purposes of this Part of this Act the person having the custody or possession of that property shall permit him to inspect it at such reasonable times as the Board may consider necessary.

• (2) If any person wilfully delays or obstructs a person acting in pursuance of this paragraph he shall be liable on summary conviction to a fine not exceeding £20.

Payment of tax

12

• (1) Except as otherwise provided by the following provisions of this Schedule, the tax on the value transferred by a chargeable transfer shall be due six months after the end of the month in which the chargeable transfer is made or, in the case of a transfer made after 5th April and before 1st October in any year otherwise than on death, at the end of April in the next year.

• (2) Personal representatives shall, on delivery of their account, pay all the tax for which they are liable and may, on delivery of that account, also pay any part of the tax chargeable on the death for which they are not liable, if the persons liable therefore request them to make the payment.

• (3) So much of the tax chargeable on the value transferred by a chargeable transfer made within three years or, as the case may be, one year of the death of the transferor as—

• (a) exceeds what it would have been had the transferor died more than three years after the transfer ; or

• (b) is tax for which, by virtue of section 26(3) of this Act, only a charity or only a political party is liable ;

shall be due six months after the end of the month in which the death occurs.

• (4) Tax chargeable under section 32 or 34 of this Act or paragraph 2 of Schedule 9 to this Act shall be due six months after the end of the month in which the event by reason of which it is chargeable occurs.

• (5) The Board may in the first instance, and without prejudice to the recovery of the remainder of the tax, accept or demand payment of an amount by reference to the value stated in an account delivered to the Board under paragraph 2 or 3 above.

• (6) Nothing in this paragraph shall be taken to authorise the recovery from, or require the payment by, any person of tax in excess of his liability as limited by section 27 of this Act.

Payment of tax by instalments

13

• (1) Subject to the following provisions of this paragraph, where any of the tax payable on the value transferred by a chargeable transfer made on death is attributable to the value of.—

• (a) land of any description, wherever situated ; or

• (b) shares or securities of a company which gave the deceased control of the company immediately before his death ; or

• (c) shares or securities of a company not falling under paragraph (b) above and not quoted on a recognised stock exchange, if either the condition stated in sub-paragraph (2) below is fulfilled or the Board are satisfied that the tax attributable to their value cannot be paid in one sum without undue hardship ; or

• (d) shares of a company not falling under paragraph (b) above and not quoted on a recognised stock exchange, if the conditions stated in sub-paragraph (3) below are fulfilled;

the tax so attributable may, if the person paying it by notice in writing to the Board so elects, be paid at his option either by eight equal yearly instalments or by sixteen equal half-yearly instalments, of which the first shall be payable six months after the end of the month in which the death occurred ; and interest under paragraph 19 below on the unpaid portion of the tax shall be added to each instalment and paid accordingly, except as otherwise provided in paragraph 16 below.

• (2) The condition mentioned in sub-paragraph (1)(c) above is that not less than 20 per cent, of so much of the tax chargeable on the value transferred by the chargeable transfer as is tax for which the person paying the tax attributable as mentioned in sub-paragraph (1) above is liable (in the same capacity) consists of tax attributable to the value of those shares or securities or such other tax (if any) as may by virtue of this paragraph or paragraph 14 below be paid by instalments.

• (3) The conditions mentioned in sub-paragraph (1)(d) above are that so much of the value transferred as is attributable to the shares exceeds £5,000 and that either—

• (a) the nominal value of the shares is not less than 10 percent, of the nominal value of all the shares of the company at the time of the death ; or

• (b) the shares are ordinary shares and their nominal value is not less than 10 per cent, of the nominal value of all ordinary shares of the company at the time of the death.

• (4) Notwithstanding the making of an election under this paragraph, the tax for the time being unpaid, with interest to the time of payment, may be paid at any time, and if at any time (whether before or after the expiration of the six months mentioned in sub-paragraph (1) above) the whole or any part of the land, shares or securities is sold, the tax unpaid (or in the case of a sale of part, the proportionate part of that tax) shall become payable forthwith (or, if the said six months have not expired, on their expiration), together with any interest accrued under paragraph 19 below.

• (5) Sub-paragraphs (1) and (4) above shall apply also in relation to a chargeable transfer made otherwise than on death, if either—

• (a) the tax attributable as mentioned in sub-paragraph (1) above is borne by the person benefiting from the transfer ; or

• (b) the transfer is made under paragraph 4, 6(2), 12 or 15 of Schedule 5 to this Act and the land, shares or securities to the value of which the tax is attributable continue to be comprised in the settlement;

and shall then apply subject to the modifications mentioned in sub-paragraph (6) below.

• (6) Where sub-paragraphs (1) and (4) above apply by virtue of sub-paragraph (5) above, they shall apply as if—

• (a) references to the date on which the death occurred were references to the date of the chargeable transfer;

• (b) references to the time six months after the end of the month in which that date falls were references to the time when the tax would be due if it were not payable by instalments ;

• (c) references to the deceased were references to the transferor or, if the transfer is made under paragraph 6, 12 or 15 of Schedule 5 to this Act, to the trustees of the settlement;

• (d) the reference to the land, shares or securities being sold—

• (i) in a case within sub-paragraph (5)(a), included a reference to any chargeable transfer in which the value transferred is wholly or partly attributable to the value of the land, shares or securities, other than a transfer made on death ; and

• (ii) in a case within sub-paragraph (5)(b), were a reference to the land, shares or securities ceasing to be comprised in the settlement; and

• (e) the reference to the condition stated in sub-paragraph (2) were omitted ; and

• (f) the reference in sub-paragraph (3) to the value transferred were a reference to that value calculated as if no tax were chargeable on it;

and the question whether tax could be paid in one sum without undue hardship shall be determined on the assumption that the shares or securities concerned would be retained by the persons liable to pay the tax.

• (7) For the purposes of this paragraph a person has control of a company at any time if he then has the control of powers of voting on all questions, or on any particular question, affecting the company as a whole which if exercised would yield a majority of the votes capable of being exercised thereon ; and—

• (a) shares or securities shall be deemed to give a person control of a company if, together with any shares or securities which are related property within the meaning of paragraph 7 of Schedule 10 to this Act, they would be sufficient to give him control of the company (as defined in the preceding provisions of this sub-paragraph); and

• (b) where shares or securities are comprised in a settlement, any powers of voting which they give to the trustees of the settlement shall be deemed to be given to the person beneficially entitled in possession to the shares or securities (except in a case where no individual is so entitled).

• (8) In this paragraph " ordinary shares" means shares which carry either—

• (a) a right to dividends not restricted to dividends at a fixed rate; or

• (b) a right to conversion into shares carrying such a right as is mentioned in paragraph (a) above.

14

• (1) Where any of the tax payable on the value transferred by a chargeable transfer made on death is attributable to the net value of a business or of an interest in a business, the tax so attributable may, if the person paying the tax by notice in writing to the Board so elects, be paid at his option either by eight equal yearly instalments or by sixteen equal half-yearly instalments, of which the first shall be payable six months after the end of the month in which the death occurred ; and interest under paragraph 19 below on the unpaid portion of the tax shall be added to each instalment and paid accordingly, except as otherwise provided in paragraph 16 below.

• (2) For the purposes of this paragraph the net value of a business is the value of the assets used in the business (including goodwill) reduced by the aggregate amount of any liabilities incurred for the purposes of the business ; and in ascertaining for the purposes of this paragraph the value of an interest in a business, no regard shall be had to assets or liabilities other than those by reference to which the net value of the business would have fallen to be ascertained under this paragraph if the tax had been attributable to the entire business.

• (3) Sub-paragraph (4) of paragraph 13 above applies in relation to this paragraph and any business or interest in a business as it applies in relation to that paragraph and the land, shares or securities mentioned therein ; and—

• (a) in the application of that sub-paragraph to a business, the sale of an interest or part of an interest in the business shall be treated as a sale of part of the business; and

• (b) in its application to an interest in a business, the payment, under a partnership agreement or otherwise, of any sum in satisfaction of the whole or any part of the interest otherwise than on a sale shall be treated as a sale of that interest or part at the time of payment.

• (4) The preceding provisions of this paragraph shall apply also in relation to a chargeable transfer made otherwise than on death, if either—

• (a) the tax attributable as mentioned in sub-paragraph (1) above is borne by the person benefiting from the transfer, or

• (b) the transfer is made under paragraph 4, 6(2), 12 or 15 of Schedule 5 to this Act and the business or interest to the value of which the tax is attributable continues to be comprised in the settlement;

and shall then apply subject to the modifications mentioned in sub-paragraph (5) below.

• (5) Where sub-paragraphs (1) to (3) above apply by virtue of sub-paragraph (4) above they shall apply as if—

• (a) references to the time six months after the end of the month in which the death occurred were references to the time when the tax would be due if it were not payable by instalments ; and

• (b) references to the business or an interest in the business being sold—

• (i) in a case within sub-paragraph (4)(a), included a reference to any chargeable transfer in which the value transferred is wholly or partly attributable to the value of the business or interest other than a transfer made on death ; and

• (ii) in a case within sub-paragraph (4)(b), were a reference to the business or interest ceasing to be comprised in the settlement.

• (6) In this paragraph " business " includes a business carried on in the exercise of a profession or vocation, but does not include a business carried on otherwise than for gain.

15

Tax chargeable on such a chargeable transfer as is mentioned in paragraph 4 of Schedule 9 to this Act may, if the person paying the tax by notice in writing to the Board so elects, be paid at his option either by eight equal yearly instalments or by sixteen equal half-yearly instalments, of which the first shall be payable six months after the end of the month in which the transfer is made.

16

• (1) Subject to the following provisions of this paragraph, where tax payable on the value transferred by a chargeable transfer—

• (a) is payable by instalments under paragraph 13 or 14 above and the tax is attributable to the value of any shares, securities, business or interest in a business ; or

• (b) is payable by instalments under paragraph 15 above ;

it shall, for the purpose of any interest to be added to each instalment, be treated as carrying interest from the date at which the instalment is payable.

• (2) Sub-paragraph (1) above does not apply to tax attributable to the value of shares or securities of a company falling within paragraph (a) of sub-paragraph (3) below unless it also falls within paragraph (b) or (c) of that sub-paragraph.

• (3) The companies referred to in sub-paragraph (2) above are—

• (a) any company whose business consists wholly or mainly of one or more of the following, that is to say, dealing in securities, stocks or shares, land or buildings, or making or holding investments;

• (b) any company whose business consists wholly or mainly in being a holding company (within the meaning of section 154 of the Companies Act 1948) of one or more companies not falling within paragraph (a) above ; and

• (c) any company whose business is that of a jobber (as defined in section 477 of the Taxes Act) or discount house and is carried on in the United Kingdom.

• (4) Sub-paragraph (1) above does not apply to tax attributable to the value included under section 22(5) of this Act in the value of a person's estate immediately before his death.

• (5) Sub-paragraph (1)(a) above applies only to the extent that the value on which the tax concerned is payable, when added to so much of the value transferred by any previous transfer of value made by the same transferor as is value the tax on which also fell within that sub-paragraph, does not exceed £250,000; and if it does exceed that amount the excess shall be attributed to the tax attributable to the values of the shares, securities, business or interest concerned in proportion to those values respectively.

• (6) The reference in sub-paragraph (5) above to the same transferor includes, in relation to chargeable transfers which are made under paragraph 6, 12 or 15 of Schedule 5 to this Act, the assumed transferor referred to in paragraph 6(4) of that Schedule.

• (7) For the purposes of this paragraph transfers of value made by the same transferor on the same day shall be treated as one.

Acceptance of property in satisfaction of tax

17

• (1) The Board may, if they think fit, on the application of any person liable to pay tax, accept in satisfaction of the whole or any part of it any property to which this paragraph applies.

• (2) This paragraph applies to any such land as may be agreed upon between the Board and the person liable to pay tax.

• (3) This paragraph also applies to any objects which are or have been kept in any building—

• (a) if the Board have determined to accept or have accepted that building in satisfaction or part satisfaction of tax or of estate duty; or

• (b) if the building or any interest therein belongs to Her Majesty in right of the Crown or of the Duchy of Lancaster, or belongs to the Duchy of Cornwall or belongs to a Government department or is held for the purposes of a Government department; or

• (c) if the building is one of which the Secretary of State is guardian under the Ancient Monuments Consolidation and Amendment Act 1913 or of which the Department of Finance for Northern Ireland is guardian under the Historic Monuments Act (Northern Ireland) 1971 ; or

• (d) if the building belongs to any body specified in paragraph 12 of Schedule 6 to this Act;

in any case where it appears to the Treasury desirable for the objects to remain associated with the building.

• (4) This paragraph also applies to—

• (a) any work of art which the Treasury are satisfied is preeminent for aesthetic merit or historical value ;

• (b) any picture, print, book, manuscript, scientific object or other thing which the Treasury are satisfied is pre-eminent for its national, scientific or historic interest; and

• (c) any collection or group of pictures, prints, books, manuscripts, works of art, scientific objects or other things if the Treasury are satisfied that the collection or group, taken as a whole, is pre-eminent for its national, scientific, historic or artistic interest.

• (5) In this paragraph "national interest" includes interest within any part of the United Kingdom.

18

• (1) Where a person has power to sell any property in order to raise money for the payment of tax, he may agree with the Board for the property to be accepted in satisfaction of that tax in pursuance of paragraph 17 above ; and, except as regards the nature of the consideration and the receipt and application thereof, any such agreement shall be subject to the same provisions and shall be treated for all purposes as a sale made in the exercise of the said power, and any conveyance or transfer made or purporting to be made to give effect to such an agreement shall have effect accordingly.

• (2) This paragraph shall not affect section 32(4) or 34(6) of this Act.

Interest

19

• (1) If—

• (a) an amount of tax charged on the value transferred by a chargeable transfer made after 5th April and before 1st October in 1975 or any later year and otherwise than on death remains unpaid after the end of the period ending with April in the next year ; or

• (b) an amount of tax charged on the value transferred by any other chargeable transfer remains unpaid after the end of the period of six months beginning with the end of the month in which the chargeable transfer was made (or, if it ends later, the period of six months from the passing of this Act) ; or

• (c) an amount of tax chargeable under section 32 of this Act or paragraph 2 of Schedule 9 to this Act remains unpaid after the end of the period of six months beginning with the end of the month in which the event by reason of which it is chargeable occurs ; it shall carry interest from the end of that period at the following rate per annum, that is to say.—

• (i) if the chargeable transfer was made on death, 6 per cent.;

• (ii) in any other case, 9 per cent.;

or (in either case) at such rate as the Treasury may from time to time by order made by statutory instrument prescribe.

• (2) Sub-paragraph (1) above shall apply in relation to tax for which, under section 26(3) of this Act, only a charity or only a political party is liable, and in relation to such an excess as is mentioned in section 27(4) of this Act, as if the chargeable transfer had been made on the death of the transferor.

• (3) Any repayment of an amount paid in excess of a liability for tax or for interest on tax shall carry interest from the date on which the payment was made at the same rate as that at which the tax, if outstanding, would have carried interest.

• (4) Interest payable under sub-paragraph (1) above shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes ; and interest paid to any person under sub-paragraph (3) above shall not be income of that person for any tax purposes.

• (5) A statutory instrument made under this paragraph shall be subject to annulment in pursuance of a resolution of the House of Commons.

Inland Revenue charge for unpaid tax

20

• (1) Except as otherwise provided, where any tax charged on the value transferred by a chargeable transfer, or any interest on it, is for the time being unpaid a charge for the amount unpaid (to be known as an Inland Revenue charge) is by virtue of this paragraph imposed in favour of the Board on—

• (a) any property to the value of which the value transferred is wholly or partly attributable ; and

• (b) where the chargeable transfer is made by the making of a settlement or is made under Schedule 5 to this Act, any property comprised in the settlement.

• (2) References in sub-paragraph (1) above to any property include references to any property directly or indirectly representing it.

• (3) Where the chargeable transfer is made on death, personal or movable property situated in the United Kingdom which was beneficially owned by the deceased immediately before his death and vests in his personal representatives is not subject to the Inland Revenue charge ; and for this purpose " personal property " includes leaseholds and undivided shares in land held on trust for sale, whether statutory or not, and the question whether any property was beneficially owned by the deceased shall be determined without regard to paragraph 3(1) of Schedule 5 to this Act.

• (4) No heritable property situated in Scotland is subject to the Inland Revenue charge, but where such property is disposed of any other property for the time being representing it is subject to the charge to which the first-mentioned property would have been subject but for this sub-paragraph.

• (5) The Inland Revenue charge imposed on any property shall take effect subject to any incumbrance thereon which is allowable as a deduction in valuing that property for the purposes of the tax.

• (6) Except as provided by paragraph 21 below, a disposition of property subject to an Inland Revenue charge shall take effect subject to that charge.

21

• (1) Where property subject to an Inland Revenue charge, or an interest in such property, is disposed of to a purchaser, then if at the time of the disposition—

• (a) in the case of land in England and Wales, the charge was not registered as a land charge or, in the case of registered land, was not protected by notice on the register; or

• (b) in the case of land in Northern Ireland the title to which is registered under the Local Registration of Title (Ireland). Act 1891, the charge was not entered as a burden on the appropriate register maintained under that Act or was not protected by a caution or inhibition under that Act or, in the case of other land in Northern Ireland, the purchaser had no notice of the facts giving rise to the charge ; or

• (c) in the case of personal property situated in the United Kingdom other than such property as is mentioned in paragraph (a) or (b) above, and of any property situated outside the United Kingdom, the purchaser had no notice of the facts giving rise to the charge ; or

• (d) in the case of any property, a certificate of discharge had been given by the Board under this Schedule and the purchaser had no notice of any fact invalidating the certificate,

the property or interest shall then cease to be subject to the charge but the property for the time being representing it shall be subject to it.

• (2) Where property subject to an Inland Revenue charge, or an interest in such property, is disposed of to a purchaser in circumstances where it does not then cease to be subject to the charge, it shall cease to be subject to it on the expiration of the period of six years beginning with the later of the following dates, namely—

• (a) the date on which the tax became due ; and

• (b) the date on which a full and proper account of the property was first delivered to the Board in connection with the chargeable transfer concerned.

• (3) In this paragraph " the time of the disposition " means—

• (a) in relation to registered land, the time of registration of the disposition; and

• (b) in relation to other property, the time of completion.

• (4) On the coming into operation of section 39 of the Land Registration Act (Northern Ireland) 1970 that Act shall be substituted in sub-paragraph (1)(b) above for the Act mentioned therein.

Recovery of tax

22

• (1) The Board shall not take any legal proceedings for the recovery of any amount of tax or of interest on tax which is due from any person unless the amount has been agreed in writing between that person and the Board or has been determined and specified in a notice under paragraph 6 above.

• (2) Where an amount has been so determined and specified but an appeal to which this sub-paragraph applies is pending against the determination the Board shall not take any legal proceedings to recover the amount determined except such part of it as may be agreed in writing or determined and specified in a further notice under paragraph 6 above to be a part not in dispute.

• (3) Sub-paragraph (2) above applies to any appeal under paragraph 7 above but not to any further appeal; and paragraph 7 above shall have effect, in relation to a determination made in pursuance of sub-paragraph (2) above, as if sub-paragraph (4) of that paragraph were omitted.

Adjustments

23

• (1) Where too little tax has been paid in respect of a chargeable transfer the tax underpaid shall be payable with interest thereon under paragraph 19 above, whether or not the amount that has been paid was that stated as payable in a notice under paragraph 6 above ; but subject to the following provisions of this paragraph and to paragraph 25 below.

• (2) Where tax attributable to the value of any property is paid in accordance with an account duly delivered to the Board under this Schedule and the payment is made and accepted in full satisfaction of the tax so attributable, no proceedings shall be brought for the recovery of any additional tax so attributable after the expiration of the period of six years beginning with the later of the following dates, namely.—

• (a) the date on which the payment (or in the case of tax paid by instalments the last payment) was made and accepted ; and

• (b) the date on which the tax or the last instalment became due;

and on the expiration of that period any liability for the additional tax and any Inland Revenue charge for that tax shall be extinguished.

• (3) In any case of fraud, wilful default or neglect by a person liable for the tax, the period mentioned in sub-paragraph (2) above shall be the period of six years beginning when the fraud, default or neglect comes to the knowledge of the Board.

24

• (1) If it is proved to the satisfaction of the Board that too much tax has been paid on the value transferred by a chargeable transfer or on so much of that value as is attributable to any property, the Board shall repay the excess unless the claim for repayment was made more than six years after the date on which the payment or last payment of the tax was made.

• (2) References in this paragraph to tax include references to interest on tax.

Certificates of discharge

25

• (1) Where application is made to the Board by a person liable for any tax on the value transferred by a chargeable transfer which is attributable to the value of property specified in the application, the Board, on being satisfied that the tax so attributable has been or will be paid, may give a certificate to that effect, and shall do so if the chargeable transfer is one made on death or the transferor has died.

• (2) Where tax is or may be chargeable on the value transferred by a transfer of value and—

• (a) application is made to the Board after the expiration of two years from the transfer (or, if the Board think fit to entertain the application, at an earlier time) by a person who is or might be liable for the whole or part of the tax ; and

• (b) the applicant delivers to the Board, if the transfer is one made on death, a full statement to the best of his knowledge and belief of all property included in the estate of the deceased immediately before his death and, in any other case, a full and proper account under this Schedule ;

the Board may, as the case requires, determine the amount of the tax or determine that no tax is chargeable ; and subject to the payment of any tax so determined to be chargeable the Board may give a certificate of their determination, and shall do so if the transfer of value is one made on death or the transferor has died.

• (3) Subject to sub-paragraph (4) below.—

• (a) a certificate under sub-paragraph (1) above shall discharge the property shown in it from the Inland Revenue charge on its acquisition by a purchaser ; and

• (b) a certificate under sub-paragraph (2) above shall discharge all persons from any further claim for the tax on the value transferred by the chargeable transfer concerned and extinguish any Inland Revenue charge for that tax.

• (4) A certificate under this paragraph shall not discharge any person from tax in case of fraud or failure to disclose material facts and shall not affect any further tax that may be payable if any further property is afterwards shown to have been included in the estate of a deceased person immediately before his death ; but in so far as the certificate shows any tax to be attributable to the value of any property it shall remain valid in favour of a purchaser of that property without notice of any fact invalidating the certificate.

Determination of questions on previous view of law

26

Where any payment has been made and accepted in satisfaction of any liability for tax and on a view of the law then generally received or adopted in practice, any question whether too little or too much has been paid or what was the right amount of tax payable shall be determined on the same view, notwithstanding that it appears from a subsequent legal decision or otherwise that the view was or may have been wrong.

Administration actions

27

Where proceedings are pending in any court for the administration of any property to the value of which any tax charged on the value transferred by a chargeable transfer is attributable, the court shall provide, out of any such property in the possession or control of the court, for the payment of any of the tax so attributable, or interest on it, which remains unpaid.

Penalties

28

• (1) Subject to sub-paragraph (2) below, any person who—

• (a) fails to deliver an account under paragraph 2 or 3 above ; or

• (b) fails to make a return under paragraph 4 above ; or

• (c) fails to comply with a notice under paragraph 5 above; or

• (d) fails to comply with a notice under paragraph 9(2) above:

shall be liable to a penalty not exceeding £50 and, if the failure continues after it has been declared by a court or the Special Commissioners, to a further penalty not exceeding £10 for each day on which it continues.

• (2) A person shall not be liable to a penalty under this paragraph for a failure which is remedied before proceedings in which the failure could be declared are commenced; and where a person has a reasonable excuse for the failure he shall not be liable to a penalty under this paragraph unless he fails to remedy it without unreasonable delay after the excuse has ceased.

29

A person who, after being duly summoned under paragraph 9(3) above, neglects or refuses to appear before the Special Commissioners at the time and place appointed for that purpose or refuses to be sworn or to answer any lawful question concerning the matters under consideration shall be liable to a penalty not exceeding £50.

30

• (1) If any person liable for any tax on the value transferred by a chargeable transfer fraudulently or negligently delivers, furnishes or produces to the Board any incorrect account, information or document, he shall be liable, in the case of fraud, to a penalty not exceeding the aggregate of £50 and twice the difference mentioned in sub-paragraph (2) below and, in the case of negligence, to a penalty not exceeding the aggregate of £50 and that difference.

• (2) The difference referred to in sub-paragraph (1) above is the amount by which the tax for which that person is liable exceeds what would be the amount of that tax if the facts were as shown in the account, information or document

• (3) Any person not liable for tax on the value transferred by a chargeable transfer who fraudulently or negligently furnishes or produces to the Board any incorrect information or document in connection with the transfer shall be liable, in the case of fraud, to a penalty not exceeding £500, and in the case of negligence to a penalty not exceeding £250.

• (4) Any person who assists in or induces the delivery, furnishing or production in pursuance of this Schedule of any account, information or document which he knows to be incorrect shall be liable to a penalty not exceeding £500.

31

• (1) If after any account, information or document has been delivered, furnished or produced by any person without fraud or negligence it comes to his notice that it was incorrect in any material respect it shall be treated for the purposes of paragraph 30 above as having been negligently delivered, furnished or produced unless the error is remedied without unreasonable delay.

• (2) If after any account, information or document has been delivered, furnished or produced by any person in pursuance of this Schedule it comes to the notice of any other person that it contains an error whereby tax for which that other person is liable has been or might be underpaid, that other person shall inform the Board of the error ; and if he fails to do so without unreasonable delay he shall be liable to the penalty to which he would be liable under paragraph 30 above if the account, information or document had been delivered, furnished or produced by him and the case were one of negligence.

Recovery of penalties

32

• (1) All proceedings for the recovery of penalties under this Schedule shall be commenced by the Board or, in Scotland, by the Board or the Lord Advocate.

• (2) Any such proceedings may be commenced either before the Special Commissioners or in the High Court or the Court of Session and shall, if brought in the High Court, be deemed to be civil proceedings by the Crown within the meaning of Part II of the Crown Proceedings Act 1947 or, as the case may be, that Part as for the time being in force in Northern Ireland.

• (3) Where any such proceedings are brought before the Special Commissioners, an appeal shall lie from their decision to the High Court or, as the case may be, the Court of Session—

• (a) by either party, on a question of law ; and

• (b) by the defendant (in Scotland, defender) against the amount of any penalty awarded ;

and on an appeal under paragraph (b) above the Court may either confirm the decision or reduce or increase the sum awarded.

• (4) Proceedings under this paragraph before the Special Commissioners shall be by way of information in writing made to them, and upon summons issued by them to the defendant (or defender) to appear before them at a time and place stated in the summons, and they shall hear and determine each case in a summary way.

• (5) References in this paragraph to the Court of Session are references to that Court as the Court of Exchequer in Scotland.

33

• (1) No proceedings for the recovery of a penalty under this Schedule shall be brought after the expiration of the period of three years beginning with the date on which the amount of the tax properly payable in respect of the chargeable transfer concerned was notified by the Board to the person or one of the persons liable for the tax or any part of it.

• (2) Where the person who has incurred any such penalty has died, any proceedings for the recovery of the penalty which have been or could have been commenced against him may be continued or commenced against his personal representatives, and any penalty awarded in proceedings so continued or commenced shall be a debt due from and payable out of his estate.

34

Any penalty awarded by the Special Commissioners shall be recoverable by the Board as a debt due to the Crown.

Summary award of penalties

35

• (1) Any penalty incurred by a person for a failure to comply with a notice under paragraph 9(2) above or incurred under paragraph 29 above may be awarded summarily by the Special Commissioners, notwithstanding that no proceedings for its recovery have been commenced.

• (2) An appeal shall lie to the High Court or the Court of Session against any award of a penalty under this paragraph and on such an appeal the Court may either confirm or reverse the decision of the Special Commissioners or reduce or increase the sum awarded.

Evidence

36

For the purposes of the preceding provisions of this Schedule, a notice under paragraph 6 of this Schedule specifying any determination which can no longer be varied or quashed on appeal shall be sufficient evidence of the matters determined.

Mitigation of penalties

37

The Board may in their discretion mitigate any penalty, or stay or compound any proceedings for recovery of any penalty, and may also, after judgment, further mitigate or entirely remit the penalty.

Refusal of probate or administration where tax unpaid

38

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) In section 42 of the Probate and Legacy Duties Act 1808 after the words “as aforesaid”, where they first occur, there shall be inserted the words “ nor unless that inventory shows by means of such receipt or certification as may be prescribed by the Commissioners of Inland Revenue either that the capital transfer tax payable on the delivery of the inventory has been paid or that no capital transfer tax is so payable ” ; and at the end there shall be inserted the following words—

“ Provided that arrangements may be made between the Court of Session and the said Commissioners providing for the purposes of this section in such cases as may be specified that the said inventory shall be effective without such receipt or certification as aforesaid, or that some other document may be substituted for the inventory ”.

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) The sections inserted by sub-paragraphs (1) . . . and the amendments made by sub-paragraph (2) above have effect in relation to grants and confirmations in respect of the estates of persons dying after the passing of this Act.

Form, verification and delivery of accounts

39

• (1) All accounts and other documents required for the purposes of this Part of this Act shall be in such form and shall contain such particulars as may be prescribed by the Board.

• (2) All accounts to be delivered to the Board under this Part of this Act shall be supported by such books, papers and other documents, and verified (whether on oath or otherwise) in such manner, as the Board may require.

• (3) For the purposes of this Part of this Act, an account delivered to a probate registry pursuant to arrangements made between the President of the Family Division or tine Lord Chief Justice of Northern Ireland and the Board shall be treated as an account delivered to the Board.

40

In the application of this Schedule to Scotland, references to an account required to be delivered to the Board by the personal representatives of a deceased person, however expressed, shall be construed as references to such an inventory or additional inventory as is mentioned in section 38 of the Probate and Legacy Duties Act 1808 which has been duly exhibited as required by that section.

Service of documents

41

A notice or other document which is to be served on a person under this Part of this Act may be delivered to him or left at his usual or last known place of residence or served by post, addressed to him at his usual or last known place of residence or his place of business or employment.

Supplemental

42

• (1) Sections 21, 22 and 35 of the Inland Revenue Regulation Act 1890 (proceedings for fines, etc.) shall not apply in relation to the tax.

• (2) Section 16 of the Stamp Act 1891, section 56 of the Finance Act 1946 and section 27 of the Finance (No. 2) Act (Northern Ireland) 1946 (inspection of public records and records of unit trusts) shall apply in relation to the tax as they apply in relation to stamp duties.

43

Section 44(3) of the Finance Act 1950 and section 3(3) of the Finance Act (Northern Ireland) 1951 (certificate of prospective amount of estate duty) shall, notwithstanding their repeal by this Act, have effect with the necessary modifications in relation to tax for which trustees of a settlement may become liable under section 25(7) of this Act.

44

In the application of this Schedule to Northern Ireland references to the High Court shall, except where the context otherwise requires, be construed as references to a judge of that court

SCHEDULES 5—7

Definition of " settlement" and related expressions

1

• (1) The following provisions of this paragraph apply for determining what is to be taken for the purposes of capital transfer tax to be a settlement, and what property is, accordingly, referred to as property comprised in a settlement or as settled property ; and who is the settlor and a trustee in relation to a settlement.

• (2) " Settlement" means any disposition or dispositions of property, whether effected by instrument, by parol or by operation of law, or partly in one way and partly in another, whereby the property is for the time being—

• (a) held in trust for persons in succession or for any person subject to a contingency ; or

• (b) held by trustees on trust to accumulate the whole or part of any income of the property or with power to make payments out of that income at the discretion of the trustees or some other person, with or without power to accumulate surplus income ; or

• (c) charged or burdened (otherwise than for full consideration in money or money's worth paid for his own use or benefit to the person making the disposition), with the payment of any annuity or other periodical payment payable for a life or any other limited or terminable period ;

or would be so held or charged or burdened if the disposition or dispositions were regulated by the law of any part of the United Kingdom; or whereby, under the law of any other country, the administration of the property is for the time being governed by provisions equivalent in effect to those which would apply if the property were so held, charged or burdened.

• (3) A lease of property which is for life or lives, or for a period ascertainable only by reference to a death, or which is terminable on, or at a date ascertainable only by reference to, a death, shall be treated as a settlement and the property as settled property, unless the lease was granted for full consideration in money or money's worth, and where a lease not granted as a lease at a rack rent is at any time to become a lease at an increased rent it shall be treated as terminable at that time.

• (4) In relation to Scotland " settlement" also includes—

• (a) an entail;

• (b) any deed by virtue of which an annuity is charged on, or on the rents of, any property (the property being treated as the property comprised in the settlement).

• (5) In sub-paragraph (4) above, " deed " includes any disposition, arrangement, contract, resolution, instrument or writing.

• (6) " Settlor ", in relation to a settlement, includes any person by whom the settlement was made directly or indirectly, and in particular (but without prejudice to the generality of the preceding words) includes any person who has provided funds directly or indirectly for the purpose of or in connection with the settlement or has made with any other person a reciprocal arrangement for that other person to make the settlement.

• (7) " Trustee ", in relation to a settlement in relation to which there would be no trustees apart from this sub-paragraph, means any person in whom the settled property or its management is for the time being vested.

• (8) Where more than one person is a settlor in relation to a settlement and the circumstances so require, this Schedule and section 25(3)(d) of this Act shall apply in relation to it as if the settled property were comprised in separate settlements.

• (9) In the application of this Schedule to Scotland, any reference to an interest in possession in settled property is a reference to an interest of any kind under a settlement actually being enjoyed by the person in right of that interest and the person in right of such an interest at any time shall be deemed to be entitled to a corresponding interest in the whole or any part of the property comprised in the settlement.

• (10) In the application of this Part of this Act to Northern Ireland this paragraph shall have effect as if references to property held in trust for persons included references to property standing limited to persons and as if the lease referred to in sub-paragraph (3) did not include a lease in perpetuity within the meaning of section 1 of the Renewable Leasehold Conversion Act 1849 or a lease to which section 37 of that Act applies.

Excluded property

2

• (1) Where property comprised in a settlement is situated outside the United Kingdom—

• (a) the property (but not a reversionary interest in the property) is excluded property unless the settlor was domiciled in the United Kingdom at the time the settlement was made ; and

• (b) section 24(2) of this Act applies to a reversionary interest in the property but does not otherwise apply in relation to the property.

• (2) In determining whether property comprised in a settlement which became so comprised before 10th December 1974 is excluded property section 45 of this Act shall be disregarded.

Interests in possession

3

• (1) A person beneficially entitled to an interest in possession in settled property shall be treated as beneficially entitled to the property in which the interest subsists.

• (2) Where the person entitled to the interest is entitled to part only of the income (if any) of the property, the interest shall be taken to subsist in such part only of the property as bears to the whole thereof the same proportion as the part of the income to which he is entitled bears to the whole of the income.

• (3) Where the part of the income of any property to which a person is entitled is a specified amount (or the whole less a specified amount) in any period, his interest in the property shall be taken, subject to sub-paragraph (4) below, to subsist in such part (or in the whole less such part) of the property as produces that amount in that period.

• (4) The Treasury may from time to time by order made by statutory instrument prescribe a higher and a lower rate for the purposes of this paragraph ; and where tax is chargeable in accordance with sub-paragraph (3) above by reference to the value of the part of a property which produces a specified amount or by reference to the value of the remainder (but not where chargeable transfers are made simultaneously and tax is chargeable by reference to the value of that part as well as by reference to the value of the remainder) the value of the part producing that specified amount—

• (a) shall, if tax is chargeable by reference to the value of that part, be taken to be not less than it would be if the property produced income at the higher rate so prescribed ; and

• (b) shall, if tax is chargeable by reference to the value of the remainder, be taken to be not more than it would be if the property produced income at the lower rate so prescribed ;

but the value to be taken by virtue of paragraph (a) above as the value of part of a property shall not exceed the value of the whole of the property.

• (5) Where the person entitled to the interest is not entitled to any income of the property but is entitled, jointly or in common with one or more other persons, to the use and enjoyment of the property, his interest shall be taken to subsist in such part of the property as corresponds to the proportion which the annual value of his interest bears to the aggregate of the annual values of his interest and that or those of the other or others.

• (6) Where, under paragraph 1(3) of this Schedule, a lease of property is to be treated as a settlement, the lessee's interest in the property shall be taken to subsist in the whole of the property less such part of it as corresponds to the proportion which the value of the lessor's interest (as determined under Schedule 10 to this Act) bears to the value of the property.

• (7) A statutory instrument made under this paragraph shall be subject to annulment in pursuance of a resolution of the House of Commons.

Termination of interest in possession treated as transfer of value

4

• (1) Where a person beneficially entitled to an interest in possession in any property comprised in a settlement disposes of his interest the disposal—

• (a) is not a transfer of value ; but

• (b) shall be treated for the purposes of this Schedule as the coming to an end of his interest;

and tax shall be charged accordingly under the following provisions of this paragraph.

• (2) Where at any time during the life of a person beneficially entitled to an interest in possession in any property comprised in a settlement his interest comes to an end, tax shall be charged, subject to the following provisions of this paragraph, as if at that time he had made a transfer of value and the value transferred had been equal to the value of the property in which his interest subsisted.

• (3) If the person whose interest in the property comes to an end becomes on the same occasion beneficially entitled to the property or to another interest in possession in the property tax shall not be chargeable under this paragraph, except in the case mentioned in sub-paragraph (10)(b) below.

• (4) If the interest comes to an end by being disposed of by the person beneficially entitled thereto and the disposal is for a consideration in money or money's worth, tax shall be chargeable under this paragraph as if the value of the property in which the interest subsisted were reduced by the amount of the consideration ; but in determining that amount the value of a reversionary interest in the property or of any interest in other property comprised in the same settlement shall be left out of account.

• (5) If the interest comes to an end during the settlor's life and on the same occasion the property in which the interest subsisted reverts to the settlor, tax shall not be chargeable under this paragraph unless the settlor had acquired a reversionary interest in the property for a consideration in money or money's worth.

• (6) If the interest comes to an end and on the same occasion the settlor's spouse becomes beneficially entitled to the settled property, then if—

• (a) the settlor's spouse is then domiciled in the United Kingdom and resident (within the meaning of the Income Tax Acts) in the United Kingdom in the year of assessment in which the interest comes to an end ; and

• (b) neither the settlor nor the settlor's spouse had acquired a reversionary interest in the property for a consideration in money or money's worth ;

tax shall not be chargeable under this paragraph.

• (7) Where the person beneficially entitled to the interest is the surviving spouse of a person who has died before 13th November 1974, tax shall not be chargeable under this paragraph if the value of the property in which the interest subsists would, by virtue of section 22(4) of this Act, have been left out of account in determining the value of his estate had he died immediately before the coming to an end of the interest.

• (8) The tax chargeable under this paragraph in a case where—

• (a) the settlement was made before 27th March 1974 ; and

• (b) the interest comes to an end before 10th December 1974 ;

shall not in any case exceed the tax that would be so chargeable if the values transferred by previous chargeable transfers made by the person beneficially entitled to the interest had been equal to the values (if any) on which tax is chargeable under this paragraph on the earlier termination of an interest in the settled property.

• (9) Where a transaction is made between the trustees of the settlement and a person who is, or is connected with.—

• (a) the person beneficially entitled to an interest in the property; or

• (b) a person beneficially entitled to any other interest in that property or to any interest in any other property comprised in the settlement; or

• (c) a person for whose benefit any of the settled property may be applied,

and, as a result of the transaction, the value of the first-mentioned property is less than it would be but for the transaction, a corresponding part of the interest shall be deemed for the purposes of this paragraph to come to an end, unless the transaction is such that, were the trustees beneficially entitled to the settled property, it would not be a transfer of value.

• (10) References in this paragraph to any property and to an interest in any property include references to part of any property or interest; and—

• (a) the tax chargeable under this paragraph on the coming to an end of part of an interest shall be charged as if the value of the property (or part) in which the interest subsisted were a corresponding part of the whole thereof; and

• (b) if the value of the property (or part) to which or to an interest in which a person becomes entitled as mentioned in sub-paragraph (3) above is less than the value on which tax would be chargeable apart from that sub-paragraph, tax shall be chargeable on a value equal to the difference.

• (11) Tax shall not be chargeable under this paragraph if the settled property is excluded property.

Relief for successive charges on interest in possession

5

• (1) Where the value transferred by a chargeable transfer falls to be determined by reference to the value of any settled property in which there subsists an interest in possession to which the transferor is entitled, and—

• (a) the value transferred by an earlier chargeable transfer also fell to be determined by reference to the value of that property; and

• (b) that earlier transfer either was or included the making of the settlement or was made after the making of the settlement;

then, if the period between those transfers is not more than four years, tax shall be charged as if the value of that property were reduced—

• (i) by 80 per cent, if that period is one year or less;

• (ii) by 60 per cent, if that period is more than one year but not more than two years ;

• (iii) by 40 per cent, if that period is more than two years but not more than three years ; and

• (iv) by 20 per cent, if that period is more than three years.

• (2) Where the transferor became entitled to the interest on the death of a person and estate duty was payable on that death in respect of the settled property sub-paragraph (1) above shall apply as if the period referred to therein were the period between the death and the chargeable transfer.

Charge on capital distributions of settled property

6

• (1) Where a distribution payment is made out of property comprised in a settlement and at the time the payment is made no interest in possession subsists in the property or in the part of it Out of which the payment is made, the payment is in this Schedule referred to as a capital distribution.

• (2) Where a person becomes entitled to an interest in possession in the whole or any part of the property comprised in a settlement at a time when no such interest subsists in the property or that part, a capital distribution shall be treated as being made out of the property or that part of the property; and the amount of the distribution shall be taken to be equal to the value at that time of the property or, if the interest is in part only of that property, of that part.

• (3) Where, at a time when no interest in possession subsists in property comprised in a settlement or in a part of that property, a transaction is made between the trustees of the settlement and a person who is, or is connected with.—

• (a) a person beneficially entitled to an interest in any of the settled property; or

• (b) a person for whose benefit any of the settled property may be applied ;

and, as a result of the transaction, the value of the property or part is less than it would be but for the transaction, a capital distribution shall be treated as being made out of the property or part of an amount equal to that by which that value is less, unless the transaction is such that, were the trustees beneficially entitled to the settled property, it would not be a transfer of value.

• (4) Tax shall be charged on any capital distribution as on the value transferred by a chargeable transfer where—

• (a) the value transferred less the tax payable on it is equal to the amount of the capital distribution ; and

• (b) the rate applicable is that specified in paragraphs 7 to 9 below;

and in those paragraphs " the assumed transferor " means the person who Would be the transferor in relation to the chargeable transfer assumed by this sub-paragraph and the appropriate Table for the purposes of those paragraphs (including the calculation of any tax that would have been chargeable as mentioned in paragraph 7(2)(a) below) is the Second Table set out in section 37(3) of this Act.

• (5) The reference in sub-paragraph 4(a) above to the tax payable on a capital distribution does not include any tax which is payable by a person to whom a distribution payment is made ; and in relation to a capital distribution treated as made under sub-paragraph (2) or (3) above or paragraph 12, 15(3) or 24(2) below, sub-paragraph (4)(a) above shall have effect as if the words " less the tax payable on it" were omitted.

• (6) Notwithstanding sub-paragraph (1) above, a distribution payment which is made to the settlor or the settlor's spouse shall not be a capital distribution if the settlor or, as the case may be, the settlor's spouse is domiciled in the United Kingdom at the time the payment is made and resident (within the meaning of the Income Tax Acts) in the United Kingdom in the year of assessment in which it is made.

• (7) Sub-paragraph (2) above shall not be taken to apply in the case of a person who, on surviving another person for a specified period, becomes entitled to an interest in possession as from the other person's death.

• (8) Where a person entitled to an interest in possession in part of the property comprised in a settlement became so entitled as a member of a class, sub-paragraph (2) above shall not apply on his becoming entitled, as such a member, to an interest in possession in another part of that property, if he becomes so entitled on the death under full age of another member of that class.

Rates of charge on capital distributions following chargeable transfers

7

• (1) This paragraph applies where, at or after the relevant time and before the capital distribution, there has been a transfer of value which satisfies the conditions stated in paragraph 11(2) below.

• (2) So far as the amount on which tax is chargeable, when added to the amount of all previous distribution payments made out of property comprised in the settlement, does not exceed the initial value, the rate chargeable shall be equal to the fraction of which—

• (a) the numerator is the amount of the tax which would have been charged on the value transferred by the relevant transfer, or such part of that amount as is attributable to the initial value, if the value so transferred had been equal to the aggregate of the initial values of the settlement and any related settlement; and

• (b) the denominator is the initial value.

• (3) So far as the amount on which tax is chargeable, when so added, exceeds the initial value, the rate or rates chargeable shall be the rate or rates that would be applicable if the assumed transferor had made previous chargeable transfers and the aggregate of the values transferred by them were equal to the aggregate of—

• (a) the values transferred by any chargeable transfers which the person who made the relevant transfer had made before the relevant transfer;

• (b) the aggregate of the initial values of the settlement and any related settlement; and

• (c) the amounts of any previous distribution payments out of property comprised in the settlement, so far as the tax (if any) chargeable thereon is chargeable in accordance with this sub-paragraph.

Rate of charge on other capital distributions

8

• (1) This paragraph applies where paragraph 7 above does not apply.

• (2) The rate or rates chargeable shall be the rate or rates that would be applicable if the assumed transferor—

• (a) had made previous chargeable transfers in any case where there had been previous distribution payments made on or after 27th March 1974 out of the settled property ; but

• (b) had made no previous chargeable transfers in any other case ;

and, where paragraph (a) above applies, the aggregate of the values transferred by the previous chargeable transfers were equal to the aggregate amounts of the previous distribution payments mentioned therein.

Further property added by settlor

9

• (1) The following provisions of this paragraph apply where, by a transfer of value made by the settlor at any time after the making of the settlement and after 26th March 1974 (in this paragraph referred to as " the subsequent transfer ") further property is added to the property comprised in the settlement immediately before the subsequent transfer (in this paragraph referred to as " the previous property " ).

• (2) The subsequent transfer shall be treated for the purposes of paragraphs 6 to 8 above as the making of a separate settlement and the further property as property comprised in that separate settlement, and the following provisions of this paragraph shall apply for determining the property out of which any capital distributions made after the subsequent transfer are to be treated as made.

• (3) If paragraph 7 above would have applied to a capital distribution made immediately before the subsequent transfer, any capital distribution made after the subsequent transfer shall be treated as made—

• (a) out of the previous property, if or to the extent that the amount of the distribution, when added to the amount of all previous distribution payments made out of the settled property, does not exceed the previous value defined in sub-paragraph (4) below; and

• (b) out of the further property in any other case.

• (4) For the purposes of sub-paragraph (3) above the previous value is the initial value, increased, if there was an earlier transfer which is a " subsequent transfer " as defined above, by the value, immediately after the earlier transfer, of any property added by it to the settled property.

• (5) If paragraph 7 above would not have applied to a capital distribution made immediately before the subsequent transfer, any capital distribution made after the subsequent transfer shall be treated as made—

• (a) out of the previous property, if or to the extent that the amount of the distribution, when added to the amount of any previous distribution payment made since the subsequent transfer, does not exceed the value of the settled property immediately before the subsequent transfer ; and

• (b) out of the further property in any other case ;

and accordingly, where paragraph (b) above applies, the rate or rates chargeable shall be determined in accordance with paragraph 7 above (and, where there is a further subsequent transfer, in accordance with sub-paragraphs (3) and (4) above).

Capital distributions after termination of interest of settlor or settlor's spouse

10

Where, after the termination of an interest in possession in a part (in this paragraph referred to as the chargeable part) of any property comprised in a settlement made after 26th March 1974, a capital distribution is made out of the chargeable part, and—

• (a) the settlor or the settlor's spouse was the person entitled to the interest before its termination, and either the settlor or the settlor's spouse was entitled to an interest in possession in the chargeable part immediately after the making of the settlement; and

• (b) the making of the settlement either was not a transfer of value or was an exempt transfer or a transfer exempt to the extent of the value of the chargeable part;

paragraphs 6 to 9 above shall apply as if the chargeable part were comprised in a separate settlement made by the person entitled to the first-mentioned interest on its termination and the termination of the interest were the relevant transfer; and as if the subsequent termination of any interest of his in any other part of the settled property were an addition made by him to the property comprised in that separate settlement.

Interpretation of paragraphs 6 to 10

11

• (1) The following provisions apply for the interpretation of paragraphs 6 to 10 above.

• (2) The relevant transfer, in relation to any settlement, is the first transfer of value made at or after the relevant time which satisfies the conditions—

• (a) that the value of the property comprised in the settlement or of that part of it out of which the capital distributions are made was taken into account in determining the value transferred; and

• (b) that the transfer was, or would but for paragraph 19(2) below or paragraphs 2 to 7 of Schedule 6 to this Act have been, a chargeable transfer ; and

• (c) that, if the settlement was made before 27th March 1974, the transfer was made neither under paragraph 4 above nor on death ;

and where it was not a chargeable transfer the reference in paragraph 7(2)(a) above to the tax which would have been charged is a reference to the tax which would have been charged but for paragraph 19(2) below or paragraphs 2 to 7 of Schedule 6 to this Act.

• (3) The relevant time, in relation to any settlement, is, if the settled property became comprised in the settlement on the death of any person, the time immediately before his death, and, in any other case, the time when the settlement was made.

• (4) Where, by the same disposition, property ceases to be comprised in one settlement and becomes comprised in another settlement, the property shall be treated as remaining comprised in the first settlement.

• (5) The amount of any distribution payment which is a capital distribution shall be taken (except for the purposes of paragraph 6(4)(a)) to be the amount on which tax is chargeable in respect of it.

• (6) A settlement is related to another if the same transfer of value is the relevant transfer in relation to both ; and for this purpose transfers of value made by the same person on the same day shall be treated as one.

• (7) " Distribution payment" means, subject to sub-paragraph (8) below, any payment which—

• (a) is not income of any person for any of the purposes of income tax and would hot for any of those purposes be income of a person not resident in the United Kingdom if he were so resident; and

• (b) is not a payment in respect of costs or expenses;

and " payment" includes the transfer of assets other than money.

• (8) The amount of any capital distribution treated as made under paragraph 6(2) or (3) above or paragraph 15(3) or 24(2) below shall also be deemed to be a distribution payment; but where, after an amount has been taken into account by virtue of this sub-paragraph as a distribution payment made out of the whole or part of any property, one or more distribution payments are made (otherwise than under this sub-paragraph) out of that property or part, the amount so taken into account shall be treated as reducing the amount of those payments.

• (9) " Initial value", in relation to any settlement, means the value, immediately after the relevant transfer, of the property then comprised in the settlement.

• (10) " Interest in possession " means an interest in possession to which an individual is beneficially entitled or, if the following conditions are satisfied, an interest in possession to which a company is beneficially entitled, the conditions being—

• (a) that the business of the company consists wholly or mainly in the acquisition of interests in settled property ; and