Finance Act 1976

• (c) the shares are so disposed of by surrender or otherwise that neither he nor any such person any longer has a beneficial interest in the shares ; or

• (d) the employee dies.

• (6) If the notional loan terminates as mentioned in subsection (5)(b) or (c) above, there is then for the year in which the event in question occurs the same charge to income tax on the employee, under section 66(3) of this Act, as if an amount equal to the then outstanding amount of the notional loan had been released or written off from a loan within that section.

• (7) Where after 6th April 1976 shares are acquired, whether or not at an under-value but otherwise as mentioned in subsection (1) above, and—

• (a) the shares are subsequently disposed of by surrender or otherwise so that neither the employee nor any person connected with him any longer has a beneficial interest in them; and

• (b) the disposal is for a consideration which exceeds the then market value of the shares,

then for the year in which the disposal is effected the amount of the excess is treated as emoluments of the employee's employment and accordingly chargeable to income tax under Schedule E.

• (8) If at the time of the event giving rise to a charge by virtue of subsection (6) or (7) above the person who is " the employee " under this section by reference to his employment in director's or higher-paid employment mentioned in subsection (1)(a) has ceased to be employed in that employment, subsections (6) and (7) apply as if he had not so ceased.

• (9) But no charge arises under subsection (7) by reference to any disposal effected after the death of the employee, whether by his personal representatives or otherwise.

• (10) This section applies in relation to acquisition and disposal of an interest in shares less than full beneficial ownership (including an interest in the proceeds of sale of part of the shares but not including a share option) as it applies in relation to the acquisition and disposal of shares, and in those cases—

• (a) for references to the shares acquired substitute references to the interest in shares acquired ;

• (b) for the reference to the market value of the shares acquired substitute a reference to the proportion corresponding to the size of the interest of the market value of the shares in which the interest subsists ;

• (c) for the reference to shares of the same class as those acquired substitute references to shares of the same class as those in which the interest subsists ; and

• (d) for the reference to the market value of fully paid up shares of that class substitute a reference to the proportion of that value corresponding to the size of the interest.

• (11) In this section—

• (a) " shares " includes stock and also includes securities as defined in section 237(5) of the Taxes Act;

• (b) " acquisition ", in relation to shares, includes receipt by way of allotment or assignment, or otherwise howsoever;

• (c) any reference to payment for shares includes giving any consideration in money or money's worth or making any subscription, whether in pursuance of a legal liability or not;

• (d) " market value " has the same meaning as, for the purposes of Part III of the Finance Act 1965, it has by virtue of section 44 of that Act;

and section 533 of the Taxes Act (connected persons) applies for the purposes of this section.

• (12) In respect of any shares or interest in shares this section only operates to include an amount in emoluments so far as any amount corresponding to it, and representing the same benefit, does not otherwise fall to be so included under the Tax Acts.

• (13) Where an amount is chargeable to tax by virtue of subsection (6) above in respect of shares or an interest in shares, then—

• (a) on a disposal of the shares or interest, where that is the event giving rise to the charge ; or

• (b) in any other case on the first disposal of the shares or interest after the event,

paragraph 4(1)(a) of Schedule 6 to the Finance Act 1965 (expenditure allowable in computation of chargeable gains) applies as if a sum equal to the amount chargeable had formed part of the consideration given by the person making the disposal for his acquisition of the shares or interest.

• (14) This section has effect for the year 1976-77 and subsequent years.

Medical insurance

68

• (1) Where in the case of a person employed in any employment (whether or not director's or higher-paid)—

• (a) expense is incurred by his employer or others in or in connection with the provision for him, and for others being members of his family or household, of insurance against the cost of medical treatment; and

• (b) that provision is made by reason of his employment and, apart from this Chapter, the expense would not be chargeable to tax as his income,

there is to be treated as emoluments of the employment, and accordingly chargeable to tax under Schedule E, an amount equal to that of the expenditure (disregarding so much of it, if any, as is made good by him to those incurring it).

• (2) Where the provision is made for a group or class to which the employees or the others in question belong, then the amount to be taken into account under subsection (1) above in respect of him is such proportion of the total expenses for all the members of the group or class as is just and reasonable.

• (3) This section does not apply to expense incurred wholly in or in connection with the provision for the employee of insurance against the cost of medical treatment outside the United Kingdom, the need for which arises while the employee is outside the United Kingdom for the purpose of performing the duties of his employment.

• (4) For the purposes of this section, medical treatment includes all forms of treatment for, and all procedures for diagnosing, any physical or mental ailment, infirmity or defect; and the cost of medical treatment includes the cost of being an in-patient, whether or not in a private room, for the purpose of medical treatment.

• (5) This section has effect for the year 1976-77 and subsequent years.

Employments subject to ss. 60 to 67

69

• (1) In this Chapter " director's or higher-paid employment " means—

• (a) employment as a director of a company (but excluding, if he does not have a material interest in the company, employment as a full-time working director); or

• (b) employment with emoluments at the rate of £5,000 a year or more.

• (2) For this purpose emoluments are to be calculated—

• (a) on the basis that they include all such amounts as come into charge under this Chapter in the case of those in director's or higher-paid employment or under section 68, or under section 36 or 37 of the Finance (No. 2) Act 1975 (cash or other vouchers); and

• (b) without any deduction under section 189, 192 or 194(3) of the Taxes Act (necessary expenses of employment, etc.).

• (3) But where a person is employed in two or more employments by the same employer, and the total of the emoluments of those employments (applying this section) is at the rate of £5,000 a year or more, all the employments are to be treated as director's or higher-paid.

• (4) All employees of a partnership or body over which an individual or another partnership or body has control are to be treated for the purposes of this section (but not for any other purpose) as if the employment were an employment by the individual or by that other partnership or body, as the case may be.

Notice of nil liability under this Chapter

70

• (1) If a person furnishes to the inspector a statement of the cases and circumstances in which payments of a particular character are made, or benefits or facilities of a particular kind are provided, for any employees (whether his own or those of anyone else), and the inspector is satisfied that no additional tax is payable under this Chapter by reference to the payments, benefits or facilities mentioned in the statement, the inspector shall notify the person accordingly; and then nothing in this Chapter applies to those payments, or to the provision of those benefits or facilities, or otherwise for imposing any additional charge to income tax.

• (2) The inspector may, if in his opinion there is reason to do so, by notice in writing served on the person to whom notification under subsection (1) above was given, revoke the notification, either as from the date of its making or as from such later date as may be specified in the notice under this subsection; and then all such income tax becomes chargeable, and all such returns are to be made by that person and by the employees in question, as would have been chargeable or would have had to be made in the first instance if the notification under subsection (1) had never been given or, as the case may be, it had ceased to have effect on the specified date.

Cash vouchers

71

• (1) Section 37 of the Finance (No. 2) Act 1975 (taxation of cash vouchers for year 1976-77 and subsequent years of assessment) shall not have effect for the year 1976-77 and accordingly—

• (a) in subsection (6) of that section the words " and subsection (6) " shall be omitted ; and

• (b) after that subsection there shall be inserted—

(7) This section has effect for the year 1977-78 and subsequent years of assessment.

• (2) In subsection (5) of that section for the words from " income tax " onwards there shall be substituted the words " income tax in respect of all payments made in exchange for vouchers issued under the scheme to be deducted in accordance with regulations under section 204 of the Taxes Act ".

Interpretation of this Chapter; supplementary

72

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

• (13) The enactments specified in Schedule 9 to this Act shall be amended as there specified (which are amendments consequential on the replacement by this Chapter of Chapter II of Part VIII of the Taxes Act and other provisions); Part I of that Schedule substitutes a new section for section 15 of the Taxes Management Act 1970, and contains consequential amendments; Part II contains other amendments.

Part IV

Relief for business and agricultural property and woodlands

Relief for business property

73–125

Relief for agricultural property

74

• (1) Schedule 8 to the Finance Act 1975 shall be amended as follows.

• (2) In sub-paragraph (1) of paragraph 1, paragraph (a) shall be omitted and for the words " so computed " there shall be substituted the words " computed in accordance with paragraph 2 below ".

• (3) In sub-paragraph (2) of paragraph 1, after the words " transfer of value " in paragraph (a) there shall be inserted the words " and either that transfer or the current transfer was or would have been a transfer made on death " and at the end of paragraph (d) there shall be added the words

and (e) the agricultural property became, through the earlier transfer, the property of the person or of the spouse of the person who is the transferor in relation to the current transfer. (2A) Where, by virtue of sub-paragraph (2) above, the conditions stated in paragraph 3 below are deemed to be satisfied but, under the earlier transfer mentioned in that sub-paragraph, the amount of the value transferred which was attributable to the agricultural property was part only of the value of that property, a like part of its agricultural value shall be substituted for the agricultural value of the property in ascertaining the part eligible for relief under paragraph 2 below

.

• (4) In paragraph 2 for the words from " reduced " to the end there shall be substituted the words " reduced by one half ".

• (5) After sub-paragraph (b) of paragraph 4 there shall be inserted the following sub-paragraph:

(bb) where the value of the shares or debentures is taken, by virtue of paragraph 9A of Schedule 10 to this Act, to be less than their value as previously determined, they would have been sufficient, without any other property, to give the transferor control as mentioned in sub-paragraph (b) above ; and

.

• (6) At the end of paragraph 5(2) there shall be added

and (c) the area of any rough grazing land shall be counted as one-sixth of its actual area. (2A) The Board may consult the Minister of Agriculture, Fisheries and Food or, as the case may require, the Secretary of State or the Department of Agriculture for Northern Ireland on any question arising; under this paragraph whether any land is rough grazing land; and paragraph 7(4) of Schedule 4 to this Act shall apply in relation to any such question as if it were a question as to the value of the land.

• (7) The preceding provisions of this section have effect as follows:—

• (a) subsections (1), (2) and (4) to (6), in relation to chargeable transfers made after 6th April 1976 ; and

• (b) subsection (3) in relation to chargeable transfers made after the passing of this Act.

Relief for woodlands

75

In Schedule 9 to the Finance Act 1975, in paragraph 6(2)(b) (expenses allowable under the Schedule to include those incurred in replanting within three years of a disposal) after the word " disposal" there shall be inserted the words " (or such longer time as the Board may allow) ".

Relief for works of art, historic buildings etc.

Conditionally exempt transfers

76

• (1) Subject to the provisions of this section, a transfer of value made after 6th April 1976 is an exempt transfer to the extent that the value transferred by it is attributable to property—

• (a) which, on a claim made for the purpose, is designated by the Treasury under section 77 below; and

• (b) with respect to which the requisite undertaking described in that section is given by such person as the Treasury think appropriate in the circumstances of the case.

• (2) A transfer of value exempt as aforesaid with respect to any property is hereafter referred to as a conditionally exempt transfer of that property.

• (3) Subsection (1) above does not apply to a transfer of value other than one which under section 22 of the Finance Act 1975 a person makes on his death unless—

• (a) the transferor or his spouse, or the transferor and his spouse between them, have been beneficially entitled to the property throughout the six years ending with the transfer; or

• (b) the transferor acquired the property on a death and either there was under the said section 22 a transfer of value on the occasion of the death which was itself a conditionally exempt transfer of the property or the value of the property was, under section 31 or 34 of the said Act of 1975, section 40 of the Finance Act 1930 or section 2 of the Finance Act (Northern Ireland) 1931 left out of account for the purposes of the capital transfer tax or estate duty chargeable on the death.

• (4) Subsection (1) above does not apply to a transfer of value to the extent to which it is an exempt transfer under paragraph 1 or 10 of Schedule 6 to the said Act of 1975 (gifts to spouses or charities).

• (5) As from 7th April 1976 the enactments mentioned in Schedule 11 to this Act shall have effect subject to the amendments there specified, being amendments consequential on the provisions of this section and sections 77 to 84 below.

Designation and undertakings

77

• (1) The Treasury may designate under this section

• (a) any pictures, prints, books, manuscripts, works of art, scientific collections or other things not yielding income which appear to the Treasury to be of national, scientific, historic or artistic interest;

• (b) any land which in the opinion of the Treasury is of outstanding scenic or historic or scientific interest;

• (c) any building for the preservation of which special steps should in the opinion of the Treasury be taken by reason of its outstanding historic or architectural interest;

• (d) any land which adjoins such a building as is mentioned in paragraph (c) above and which in the opinion of the Treasury is essential for the protection of the character and amenities of the building ;

• (e) any object which in the opinion of the Treasury is historically associated with such a building as is mentioned in paragraph (c) above.

• (2) In the case of property within subsection (1)(a) above, the requisite undertaking is that, until the person beneficially entitled to the property dies or the property is disposed of, whether by sale or gift or otherwise—

• (a) the property will be kept permanently in the United Kingdom and will not leave it temporarily except for a purpose and a period approved by the Treasury ; and

• (b) reasonable steps will be taken for the preservation of the property and for securing reasonable access to the public.

• (3) If it appears to the Treasury, on a claim made for the purpose, that any documents which are designated or to be designated under subsection (1)(a) above contain information which for personal or other reasons ought to be treated as confidential, they may exclude those documents, either altogether or to such extent as they think fit, from so much of an undertaking given or to be given under subsection (2)(b) above as relates to public access.

• (4) In the case of other property within subsection (1) above, the requisite undertaking is that, until the person beneficially entitled to the property dies or the property is disposed of, whether by sale or gift or otherwise, reasonable steps will be taken—

• (a) in the case of land falling within subsection (1)(b) above, for the maintenance of the land and the preservation of its character ; and

• (b) in the case of any other property, for the maintenance, repair and preservation of the property and, if it is an object falling with subsection (1)(e) above, for keeping it associated with the building concerned ;

and for securing reasonable access to the public.

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

Chargeable events

78

• (1) Where there has been a conditionally exempt transfer of any property, tax shall be charged under this section on the first occurrence after the transfer of an event which under this section is a chargeable event with respect to the property.

• (2) If the Treasury are satisfied that at any time an undertaking given with respect to the property under section 76 above or subsection (5)(b) below has not been observed in a material respect, the failure to observe the undertaking is a chargeable event with respect to the property; and the person liable for the tax chargeable by reference to that event is the person who, if the property were sold at the time the tax becomes chargeable, would be entitled to receive (whether for his benefit or not) the proceeds of sale or any income arising from them.

• (3) If—

• (a) the person beneficially entitled to the property dies; or

• (b) the property is disposed of, whether by sale or gift or otherwise,

the death or disposal is, subject to subsections (4) and (5) below, a chargeable event with respect to the property ; and the person liable for the tax chargeable by reference to the event is, in a case within paragraph (a), the person who, if the property were sold immediately after the death would be entitled to receive (whether for his own benefit or not) the proceeds of sale or any income arising from them and, in a case within paragraph (b), the person for whose benefit the property is disposed of.

• (4) A death or disposal is not a chargeable event with respect to any property if the personal representatives of the deceased (or, in the case of settled property, the trustees or the person next entitled) within three years of the death make or, as the case may be, the disposal is—

• (a) a disposal of the property by sale by private treaty to a body mentioned in paragraph 12 of Schedule 6 to the Finance Act 1975 (museums etc.) or a disposal of it to such a body otherwise than by sale ; or

• (b) a disposal to the Board in pursuance of paragraph 17 of Schedule 4 to that Act or in accordance with directions given by the Treasury under section 50 or 51 of the Finance Act 1946 (acceptance of property in satisfaction of tax);

and a death or disposal of the property after such a disposal as is mentioned in paragraph (a) or (b) above is not a chargeable event with respect to the property unless there has again been a conditionally exempt transfer of it after that disposal.

• (5) A death or disposal otherwise than by sale is not a chargeable event with respect to any property if—

• (a) the transfer of value made on the death or the disposal is itself a conditionally exempt transfer of the property ; or

• (b) the undertaking previously given with respect to the property under section 76 above (or any undertaking previously given with respect to the property under this paragraph) is replaced by a corresponding undertaking given by such person as the Treasury think appropriate in the circumstances of the case.

• (6) Where tax is chargeable under this section with respect to any property within section 77(1)(c), (d) or (e) above, tax shall also be chargeable with respect to any property associated with it; but the Treasury may direct that the foregoing provisions of this subsection shall not apply if it appears to them that the entity consisting of the building, land and objects concerned has not been materially affected.

• (7) For the purposes of subsection (6) above two or more properties are associated with each other if one of them is a building falling within subsection (1)(c) of section 77 above and the other or others such land or objects as, in relation to that building, fall within subsection (1)(d) or (e) of that section.

Amount of charge under s. 78

79

• (1) Subject to the provisions of this section, tax chargeable in respect of any property under section 78 above by reference to a chargeable event shall be charged—

• (a) on an amount equal to the value of the property at the time of the chargeable event; and

• (b) at the following rate or rates—

• (i) if the relevant transferor is alive, the rate or rates that would be applicable to that amount under the second Table in section 37 of the Finance Act 1975 if it were the value transferred by a chargeable transfer made by the relevant transferor at that time;

• (ii) if the relevant transferor is dead, the rate or rates that would have applied to that amount under the appropriate Table in that section if it had been added to the value transferred on his death and had formed the highest part of that value.

• (2) For the purposes of subsection (1)(b)(ii) above the appropriate Table is, if the conditionally exempt transfer by the relevant transferor was made on death, the first Table and, if not, the second.

• (3) Where the chargeable event is a disposal on sale and—

• (a) the sale was not intended to confer any gratuitous benefit on any person ; and

• (b) was either a transaction at arm's length between persons not connected with each other or a transaction such as might be expected to be made at arm's length between persons not connected with each other,

the value of the property at the time of the chargeable event shall be taken for the purposes of subsection (1)(a) above to be equal to the proceeds of the sale.

• (4) Where by virtue of section 76(4) above the conditionally exempt transfer extended only to part of the property, the amount mentioned in subsection (1)(a) above shall be proportionately reduced.

• (5) The relevant transferor in relation to the tax chargeable on the occasion of a chargeable event in respect of any property is—

• (a) if there has been only one conditionally exempt transfer of the property before the event, the person who made that transfer;

• (b) if there have been two or more such transfers and the last was before, or only one of them was within, the period of thirty years ending with the event, the person who made the last of those transfers ;

• (c) if there have been two or more such transfers within that period, the person who made whichever of those transfers the Board may select.

• (6) The conditionally exempt transfers to be taken into account for the purpose of subsection (5) above in relation to a chargeable event do not include transfers made before any previous chargeable event in respect of the same property or before any event which apart from section 78(4) above would have been such a chargeable event.

• (7) Where after a conditionally exempt transfer of any property there is a chargeable transfer the value transferred by which is wholly or partly attributable to that property, any tax charged on that value so far as attributable to that property shall be allowed as a credit—

• (a) if the chargeable transfer is a chargeable event with respect to the property, against the tax chargeable in accordance with this section by reference to that event;

• (b) if the chargeable transfer is not such a chargeable event, against the tax chargeable in accordance with this section by reference to the next chargeable event with respect to the property.

Reinstatement of transferor's cumulative total

80

• (1) Where tax has become chargeable under section 78 above by reference to a chargeable event in respect of any property (" the relevant event") the rate or rates of tax applicable to any subsequent chargeable transfer made by the person who made the last conditionally exempt transfer of the property before the relevant event shall be determined as if the amount on which tax has become chargeable as aforesaid were value transferred by a chargeable transfer made by him at the time of the relevant event.

• (2) Where the person who made the last conditionally exempt transfer of the property before the relevant event—

• (a) is dead ; and

• (b) is the relevant transferor in relation to a subsequent chargeable event,

section 79(1)(b)(ii) above shall have effect as if the value transferred on his death were increased by the amount on which tax has become chargeable on the occasion of the relevant event.

• (3) If—

• (a) the person who made the last conditionally exempt transfer of the property before the relevant event is not the relevant transferor in relation to that event; and

• (b) at the time of that event or within the previous five years the property is or has been comprised in a settlement made not more than thirty years before that event; and

• (c) a person who is the settlor in relation to the settlement has made a conditionally exempt transfer of the property within those thirty years,

subsections (1) and (2) above shall have effect with the substitution for references to the person who made the last conditionally exempt transfer before the relevant event of a reference to any such person as is mentioned in paragraph (c) above.

• (4) The conditionally exempt transfers to be taken into account for the purposes of subsection (3)(c) above in relation to the relevant event do not include transfers made before any previous chargeable event in respect of the same property or before any event which apart from section 78(4) above would have been such a chargeable event.

Conditionally exempt distributions

81

• (1) A transfer of property or other event shall not constitute or give rise to a distribution payment or capital distribution under any provision of Schedule 5 to the Finance Act 1975 (settled property) other than paragraph 12 if the property by reference to which the amount of the distribution payment or capital distribution would fall to be determined has been comprised in the settlement throughout the six years ending with the transfer or event, and—

• (a) the property is, on a claim made for the purpose, designated by the Treasury under section 77 above; and

• (b) the requisite undertaking described in that section is given with respect to the property by such person as the Treasury think appropriate in the circumstances of the case.

• (2) A transfer or event which by virtue of subsection (1) above does not constitute or give rise to a distribution payment or capital distribution is hereafter referred to as a conditionally exempt distribution of the property in question.

• (3) Subject to the following provisions of this section, sections 78, 79 and 80 above shall have effect as if—

• (a) references to a conditionally exempt transfer included references to a conditionally exempt distribution;

• (b) references to a disposal otherwise than by sale included references to any event on the occurrence of which a capital distribution or distribution payment is treated as made under any provision of the said Schedule 5 other than paragraph 12; and

• (c) references to an undertaking given under section 76 above included references to an undertaking given under this section.

• (4) Where the relevant transferor for the purposes of section 79 above falls to be determined by reference to a conditionally exempt distribution, paragraph (b) of subsection (1) of that section shall not apply and the rate or rates at which the tax is charged on the amount mentioned in paragraph (a) of that section shall be—

• (a) if the settlement is still in existence at the time of the chargeable event, the rate or rates that would be applicable (under paragraph 7 or, as the case may be, paragraph 8 of the said Schedule 5) to that amount if a capital distribution of that amount were made at that time out of the property comprised in the settlement;

• (b) if the settlement has then ceased to exist—

• (i) subject to sub-paragraph (ii) below, the rate or rates that would be applicable as mentioned in paragraph (a) above but by reference to a capital distribution made on the occasion on which the settlement ceased to exist;

• (ii) if a capital distribution was made or treated as made on that occasion, the rate or rates that would have been applicable to that amount if it had been included in the amount of that distribution and had formed the highest part of it.

• (5) Where tax has become chargeable as mentioned in section 80 above by reference to a chargeable event (" the relevant event") and the person to whom that section applies falls to be determined by reference to a conditionally exempt distribution, the following provisions shall have effect instead of subsections (1) and (2) of that section—

• (a) the rate or rates of tax applicable to any subsequent capital distribution out of the property comprised in the settlement shall be determined as if the amount on which tax has become chargeable had been the amount of a distribution payment made at the time of the relevant event ; and

• (b) where the settlement has ceased to exist and the tax chargeable on the occasion of a subsequent chargeable event falls to be calculated in accordance with paragraph (i) or (ii) of subsection (4)(b) above, that paragraph shall have effect as if the amount of the capital distribution mentioned in that paragraph were increased by the amount on which tax has become chargeable on the occasion of the relevant event.

Exemption from periodic charge

82

• (1) Where property is comprised in a settlement and there has been a conditionally exempt transfer of the property on or before the occasion on which it became comprised in the settlement, paragraph 12 of Schedule 5 to the Finance Act 1975 (periodic charge to tax where there is no interest in possession) shall not have effect in relation to the property on any relevant date (whether a relevant anniversary or, in a case within sub-paragraph (2) of that paragraph, the end of a year) falling before the first occurrence after the transfer of a chargeable event with respect to the property.

• (2) Where property is comprised in a settlement and there has been, on or before the occasion on which it became comprised in the settlement, a disposal of the property in relation to which subsection (4) of section 31 of the Finance Act 1965 (capital gains tax relief for works of art etc.) had effect, the said paragraph 12 shall not have effect in relation to the property on any relevant date falling before the first occurrence after the disposal of an event on the happening of which the property is treated as sold under subsection (5) of that section.

• (3) Where property is comprised in a settlement and there has been no such transfer or disposal of the property as is mentioned in subsection (1) or (2) above on or before the occasion on which it became comprised in the settlement, then, if—

• (a) the property has, on a claim made for the purpose, been designated by the Treasury under section 77 above; and

• (b) the requisite undertaking described in that section has been given by such person as the Treasury think appropriate in the circumstances of the case,

tax which would otherwise be chargeable under the said paragraph 12 in respect of the property on a relevant date shall be deferred until the first occurrence of an event which, if there had been a conditionally exempt transfer of the property when the claim was made and the undertaking had been given under section 76 above, would be a chargeable event with respect to the property.

• (4) Where any deferred tax becomes chargeable on the occurrence of a chargeable event, it shall be charged—

• (a) subject to subsection (5) below, on an amount equal to the value of the property at the time of the chargeable event; and

• (b) at the rate at which it would be chargeable if the relevant date had fallen at that time.

• (5) If more than one relevant date has passed and, accordingly, more than one deferred tax becomes chargeable—

• (a) the second deferred tax shall be charged on the value mentioned in subsection (4)(a) above less the amount of the first deferred tax ; and

• (b) the third deferred tax (if any) shall be charged on the amount found under paragraph (a) above less the amount of the second deferred tax,

and so on.

• (6) In its application to a capital distribution made after the chargeable event, paragraph 13(1) of the said Schedule 5 (tax credit for periodic charge) shall have effect as if the reference to tax charged at a relevant anniversary included a reference to tax deferred from a relevant anniversary and charged under subsection (4) above.

• (7) The persons liable for any deferred tax shall be those who would have been liable but for the deferment.

Transfers on or before 6th April 1976

83

• (1) Section 31 to 34 of the Finance Act 1975 (conditional exemption for certain objects, land etc. on death) shall not apply to any death after 6th April 1976.

• (2) Where tax is chargeable after that date under subsection (3) of section 33 or subsection (8) of section 34 of the said Act of 1975 by reason of a sale, so much of paragraph (b) of that subsection as provides for the value of the object or property to be treated as equal to the proceeds of sale shall not apply unless the sale was—

• (a) not intended to confer any gratuitous benefit on any person; and

• (b) was either a transaction at arm's length between persons not connected with each other or a transaction such as might be expected to be made at arm's length between persons not connected with each other.

• (3) Where there has been a transfer of value in relation to which the value of any property has been left out of account under the provisions of sections 31 to 34 of the said Act of 1975 and, before any tax has become chargeable in respect of that property under those provisions, there is a conditionally exempt transfer of that property, then, on the occurrence of a chargeable event in respect of that property—

• (a) if there has been no conditionally exempt transfer of the property on death, tax shall be chargeable either under section 78 above or under those provisions as the Board may elect; and

• (b) if there has been such a conditionally exempt transfer, tax shall be chargeable under that section and not under those provisions.

• (4) In sections 79(7) and 82 above references to a conditionally exempt transfer of any property include references to a transfer of value in relation to which the value of any property has been left out of account under the provisions of the said sections 31 to 34 and, in relation to such property, references to a chargeable event or to the tax chargeable in accordance with section 79 above by reference to a chargeable event include references to an event on the occurrence of which tax becomes chargeable under those provisions or to the tax so chargeable.

• (5) In paragraph 19(1)(c) of Schedule 4 to the Finance Act 1975 (interest on unpaid tax) after " section 32 " there shall be inserted " or 34 ".

• (6) In its application to a sale on any date after 6th April 1976 which does not satisfy the requirements of subsection (2)(a) and (b) above, subsection (2) of section 40 of the Finance Act 1930 shall have effect as if the reference to the proceeds of sale were a reference to the value of the objects on that date.

• (7) Subsections (3) and (4) above shall apply to a death in relation to which the value of any property has been left out of account under the said section 40 as they apply to such a transfer of value as is there mentioned, taking references to tax becoming chargeable under the provisions there mentioned as references to estate duty becoming chargeable under that section or section 48 of the Finance Act 1950.

• (8) In determining for the purposes of subsection (2) of the said section 40 what is the last death on which the objects passed there shall be disregarded any death after 6th April 1976.

• (9) In the application of this section to Northern Ireland for references to section 40 of the Finance Act 1930 and section 48 of the Finance Act 1950 there shall be substituted references to section 2 of the Finance Act (Northern Ireland) 1931 and Article 6 of the Finance (Northern Ireland) Order 1972 respectively.

Maintenance funds for historic buildings

84

• (1) Subject to the provisions of Part II of Schedule 6 to the Finance Act 1975 as applied by this section, a transfer of value made after 2nd May 1976 is an exempt transfer to the extent that—

• (a) the value transferred by it is attributable to property which becomes comprised in a settlement; and

• (b) the Treasury so direct (whether before or after the time of the transfer);

and paragraphs 6 to 12 of Schedule 5 to that Act shall not apply in relation to property comprised in a settlement by virtue of a transfer of value exempt under this section.

• (2) The Treasury shall, on a claim made for the purpose, give a direction under subsection (1) above if—

• (a) they are satisfied that—

• (i) the settlement complies with the requirements of subsection (3) below ; and

• (ii) the property is of a character and amount appropriate for the purposes of the settlement; and

• (b) the trustees include a custodian trustee and are approved by the Treasury.

• (3) The requirements referred to in subsection (2)(a) above are—

• (a) that during the continuance of the settlement none of the property comprised in it can be applied otherwise than—

• (i) for the maintenance, repair or preservation of, or making provision for public access to, a building or land which is for the time being a qualifying building or qualifying land as defined in subsection (5) below; or

• (ii) as respects income not so applied and not accumulated, for the benefit of a body mentioned in paragraph 12 of Schedule 6 to the said Act of 1975 (museums etc.) or of a qualifying charity as defined in subsection (7) below ; and

• (b) that on the termination of the settlement none of the property comprised in it can devolve otherwise than on any such body or charity as aforesaid.

• (4) Where property is comprised in a settlement by virtue of a transfer of value exempt under this section the trustees shall from time to time furnish the Treasury with such accounts and other information relating to the settlement as the Treasury may reasonably require.

• (5) A building or land is a qualifying building or qualifying land for the purposes of subsection (3)(a) above if—

• (a) it has been designated under section 34(1)(b) or (c) of the Finance Act 1975 or section 77(1)(c) or (d) above; and

• (b) the requisite undertaking has been given with respect to it under the said section 34 or under section 76, 78(5)(b) or 82(3) above ; and

• (c) tax has not (since the last occasion on which such an undertaking was given) become chargeable with respect to it under the said section 34 or under section 78 or 82(3) above.

• (6) If it appears to the Treasury that provision is, or is to be, made by a settlement for the maintenance, repair or preservation of any such property as is mentioned in subsection (1)(c) or (d) of section 77 above, they may, on a claim made for the purpose—

• (a) designate that property under this subsection ; and

• (b) accept with respect to it an undertaking such as is described in subsection (4) of that section;

and, if they do so, subsection (5) above shall have effect as if the designation were under that section and the undertaking under section 76 above and as if the reference to tax becoming chargeable were a reference to the occurrence of an event on which tax would become chargeable under section 78 above if there had been a conditionally exempt transfer of the property when the claim was made and the undertaking had been given under the said section 76.

• (7) A charity is a qualifying charity for the purposes of subsection (3) above if it exists wholly or mainly for maintaining, repairing or preserving for the public benefit buildings of historic or architectural interest, land of scenic, historic or scientific interest or objects of national, scientific, historic or artistic interest.

In this subsection " national interest" includes interest within any part of the United Kingdom.

• (8) In paragraph 15(1), (2) and (3) of Schedule 6 to the said Act of 1975 after the words " to 13 above " there shall be inserted the words " and section 84 of the Finance Act 1976 ".

• (9) In the application of this section to Scotland for the reference in subsection (2)(b) above to a custodian trustee there shall be substituted a reference to any such body or charity as is mentioned in subsection (3) above or any other body approved by the Treasury for the purposes of this subsection.

• (10) For the purposes of the application of this section to Northern Ireland, section 4(2) and (3) of the Public Trustee Act 1906 (custodian trustees) shall extend to Northern Ireland as if a trust corporation within the meaning of the Probates and Letters of Administration Act (Northern Ireland) 1933 were a body corporate entitled by rules made under the said Act of 1906 to act as a custodian trustee.

Gifts for public benefit

85

In Schedule 6 to the Finance Act 1975, in paragraph 13(2)(f), for the words "or historic or scientific" there shall be substituted the words " scientific, historic or artistic ".

Mutual and voidable transfers

Mutual transfers: exemption for donee's gift

86

• (1) This section and section 87 below have effect where—

• (a) a person (" the donor") makes a chargeable transfer (" the donor's transfer ") which increases the estate of another person (" the donee "); and

• (b) the donee subsequently makes a transfer of value (" the donee's transfer ") which either—

• (i) is made in the donor's life-time and increases the value of the estate of the donor or his spouse; or

• (ii) is made within two years after the donor's death and increases the value of the estate of the donor's widow or widower.

• (2) The donee's transfer shall be an exempt transfer to the extent to which the value thereby transferred does not exceed—

• (a) the amount by which his estate was increased by the donor's transfer; or

• (b) if there has been a previous donee's transfer, so much of that amount as has not been taken into account under this subsection for exempting that transfer.

• (3) In subsection (1) above references to a transfer are references to a transfer (whether made before or after the passing of this Act) that is a disposition between individuals, including any disposition treated as made by virtue of section 20(7) of the Finance Act 1975 but not anything else that is treated as a disposition for the purposes of capital transfer tax.

• (4) Subsection (1)(b) above has effect in relation to a person as the donor's spouse, widow or widower only if at the relevant time both the donor and that person were, or neither of them was, domiciled in the United Kingdom ; and for that purpose the relevant time is, in the case of a spouse, the time of the donee's transfer and, in the case of a widow or widower, the time of the donor's death.

• (5) Where the donor has died before 1st April 1975 subsection (1)(b)(ii) above shall have effect with the substitution for the reference to his death of a reference to that date.

Mutual transfers: relief for donor's gift

87

• (1) The donor may, within six years after the donee's transfer, claim that for the purposes of this section the value transferred by the donor's transfer shall be treated as cancelled by the donee's transfer to the extent specified in subsection (3) below ; and thereupon—

• (a) tax on the cancelled value paid or payable (whether or not by the claimant) shall be repaid to him by the Board or, as the case may be, shall not be payable; and

• (b) the rate or rates of tax applicable to any chargeable transfer made by the donor after the claim shall be determined as if the values previously transferred by chargeable transfers made by the donor were reduced by the cancelled value.

• (2) Where the donor has died, then—

• (a) if the case falls within section 86(1)(b)(i) above, a claim may be made under subsection (1) above by the donor's personal representatives and paragraph (b) of that subsection shall apply as if for the reference to any chargeable transfer made by the donor after the claim there were substituted a reference to the chargeable transfer made by him on his death;

• (b) if the case falls within section 86(1)(b)(ii) above, a claim may be made under subsection (1) above by the donor's widow or widower.

• (3) The amount of the value transferred to be treated as cancelled by a donee's transfer shall be such amount thereof as, after deduction of the tax charged on it, is equal—

• (a) if paragraph (b) below does not apply, to the value restored by the transfer ;

• (b) if more than twelve months have elapsed between the donor's transfer and the donee's, to the value so restored reduced by 4 per cent. for every twelve months that have so elapsed ;

and where the cancelled amount is less than the whole of the value transferred it shall be treated as the highest part of that value.

• (4) As between two or more donor's transfers made by the same donor to the same donee value transferred by a later transfer shall be treated as cancelled rather than value transferred by an earlier one; and where there has been a claim in respect of a previous donee's transfer references in the foregoing provisions of this section to the value transferred shall be construed as references to the part of that value not treated as cancelled by that transfer.

• (5) For the purposes of subsection (3) above the value restored by the donee's transfer is so much of the value thereby transferred as does not exceed—

• (a) the amount by which the donee's estate was increased by the donor's transfer ; or

• (b) if there has been a previous donee's transfer, so much of that amount as was not taken into account as the value restored by that transfer.

• (6) In paragraph (a) of subsection (1) above the reference to tax includes a reference to interest on tax.

• (7) Tax repayable on a claim under this section shall carry interest (which shall not constitute income for any tax purposes) at the rate for the time being applicable under paragraph 19(1)(ii) of Schedule 4 to the Finance Act 1975 from the date on which the claim is made.

• (8) For the purposes of liability to additional tax by reason of the donor's death within three years after the donor's transfer, the value thereby transferred which is treated as cancelled by a donee's transfer made before the death shall include any value that would be so treated if subsection (3)(b) above had not applied.

• (9) Where the donee's transfer has increased the estate of the spouse, widow or widower of another person any value thereby transferred which can (or if a claim were made could) be taken into account as value restored in relation to a transfer made by the spouse, widow or widower shall not be so taken into account in relation to a transfer made by that other person.

Voidable transfers

88

• (1) Where on a claim made for the purpose it is shown that the whole or any part of a chargeable transfer (" the relevant transfer ") has by virtue of any enactment or rule of law been set aside as voidable or otherwise defeasible—

• (a) tax paid or payable by the claimant (in respect of the relevant transfer or any other chargeable transfer made before the claim) that would not have been payable if the relevant transfer had been void ab initio shall be repaid to him by the Board, or as the case may be, shall not be payable ; and

• (b) the rate or rates of tax applicable to any chargeable transfer made after the claim by the person who made the relevant transfer shall be determined as if that transfer or that part of it had been void as aforesaid.

• (2) In subsection (1)(a) above " tax " includes interest on tax.

• (3) Tax repayable on a claim under subsection (1) above shall carry interest (which shall not constitute income for any tax purposes) at the rate for the time being applicable under paragraph 19(1)(ii) of Schedule 4 to the Finance Act 1975 from the date on which the claim is made.

• (4) This section applies in relation to transfers before as well as after the passing of this Act.

Dispositions that are not transfers of value

Dispositions allowable for income tax or conferring retirement benefits

89

• (1) A disposition made by any person is not a transfer of value if it is allowable in computing that person's profits or gains for the purposes of income tax or corporation tax or would be so allowable if those profits or gains were sufficient and fell to be so computed.

• (2) Without prejudice to subsection (1) above, a disposition made by any person is not a transfer of value if—

• (a) it is a contribution to a retirement benefits scheme which is approved by the Board for the purposes of Chapter II of Part II of the Finance Act 1970 (occupational pension schemes) and provides benefits in respect of service which is or includes service as an employee (as defined in that Chapter) of that person ; or

• (b) it is made so as to provide—

• (i) benefits on or after retirement for a person not connected with him who is or has been in his employ; or

• (ii) benefits on or after the death of such a person for his widow or dependants,

and does not result in the recipient receiving benefits which, having regard to their form and amount, are greater than what could be provided under a scheme approved as aforesaid.

• (3) Where a person makes dispositions of the kinds described in both paragraph (a) and paragraph (b) of subsection (2) above in respect of service by the same person, they shall be regarded as satisfying the conditions of that subsection only to the extent to which the benefits they provide do not exceed what could be provided by a disposition of the kind described in either of those paragraphs.

• (4) For the purposes of subsection (2)(b) above, the right to occupy a dwelling rent-free or at a rent less than might be expected to be obtained in a transaction at arm's length between persons not connected with each other shall be regarded as equivalent to a pension at a rate equal to the rent or additional rent that might be expected to be obtained as aforesaid.

• (5) Where a disposition satisfies the conditions of the preceding provisions of this section to a limited extent only, so much of it as satisfies them and so much of it as does not satisfy them shall be treated as separate dispositions.

• (6) Paragraph 9 of Schedule 6 to the Finance Act 1975 (which is superseded by subsection (1) above) shall cease to have effect.

• (7) This section applies to dispositions before as well as after the passing of this Act.

Dispositions on trust for benefit of employees

90

• (1) Subject to subsection (3) below, a disposition of property made to trustees by a close company whereby the property is to be held on trusts of the description specified in paragraph 17(1) of Schedule 5 to the Finance Act 1975 is not a transfer of value if the persons for whose benefit the trusts permit the property to be applied include all or most of either—

• (a) the persons employed by or holding office with the company; or

• (b) the persons employed by or holding office with the company or any one or more subsidiaries of the company.

• (2) Subject to subsection (3) below, a disposition of property made to trustees by an individual beneficially entitled to shares in a company whereby the property is to be held on trusts of the said description is not a transfer of value if—

• (a) the property consists of all the shares and securities of the company to which he is beneficially entitled; and

• (b) immediately after the disposition there are no shares or securities of the company to which his spouse is beneficially entitled; and

• (c) as a result of the disposition and of any other dispositions made on the same occasion, the trustees—

• (i) hold all or substantially all of the ordinary shares in the company, and

• (ii) have powers of voting on all questions affecting the company as a whole which if exercised would yield a majority of the votes capable of being exercised thereon; and

• (d) the persons for whose benefit the trusts permit the property to be applied include all or most of the persons employed by or holding office with the company.

• (3) Subject to subsection (4) below, subsections (1) and (2) above do not apply if the trusts permit any of the property to be applied at any time (whether during any such period as is referred to in the said paragraph 17(1) or later) for the benefit of—

• (a) a person who is a participator in the company making the disposition or, as the case may be, the company whose shares are disposed of ; or

• (b) any other person who is a participator in any close company that has made a disposition whereby property became comprised in the same settlement, being a disposition which but for this section would have been a transfer of value ; or

• (c) any other person who has been a participator in any such company as is mentioned in paragraph (a) or (b) above at any time after, or during the ten years before, the disposition made by that company or, as the case may be, the disposition of its shares ; or

• (d) any person who is connected with any person within paragraph (a), (b) or (c) above.

• (4) The participators in a company who are referred to in subsection (3) above do not include any participator who on a winding-up of the company would not be entitled to 5 per cent. or more of its assets ; and in determining whether the trusts permit property to be applied as mentioned in that subsection, no account shall be taken of any power to make a payment which is the income of any person for any of the purposes of income tax, or would be the income for any of those purposes of a person not resident in the United Kingdom if he were so resident.

• (5) In this section—

• " close company " and " participator " have the same meanings as in section 39 of the Finance Act 1975 ;

• " ordinary shares " means shares which carry either— a right to dividends not restricted to dividends at a fixed rate, or a right to conversion into shares carrying such a right as is mentioned in paragraph (a) above;

• " subsidiary " has the same meaning as in the Companies Act 1948 ; and references in subsections (3) and (4) above to a participator in a company shall, in the case of a company which is not a close company, be construed as references to a person who would be a participator in the company if it were a close company.

• (6) This section applies to dispositions made after 6th April 1976.

Waiver of remuneration

91

• (1) Subject to subsection (2) below, the waiver or repayment of an amount of remuneration shall not be a transfer of value if, apart from the waiver or repayment, that amount would be assessable to income tax under Schedule E.

• (2) Where, apart from the waiver or repayment, the amount of the remuneration would be allowable as a deduction in computing for the purposes of income tax or corporation tax the profits or gains or losses of the person by whom it is payable or paid, this section applies only if, by reason of the waiver or repayment, it is not so allowed or is otherwise brought into charge in computing those profits or gains or losses.

• (3) This section applies to waivers or repayments before as well as after the passing of this Act.

Waiver of dividends

92

• (1) A person who waives any dividend on shares of a company within twelve months before any right to the dividend has accrued does not by reason of the waiver make a transfer of value.

• (2) This section applies to waivers before as well as after the passing of this Act.

Other exemptions and reliefs

Exemption for transfers under ò,000

93

• (1) In paragraph 2 of Schedule 6 to the Finance Act 1975 (exemption for transfers of value under £1,000) for " £1,000" wherever it occurs there shall be substituted " £2,000 ".

• (2) This section does not affect the operation of paragraph 2 in relation to transfers of value made before 6th April 1976 or the amount which, under sub-paragraph (2) of that paragraph, may be carried forward to the year beginning on that date.

Transfers between spouses

94

• (1) In relation to transfers of value made after 6th April 1976, paragraph 1 of Schedule 6 to the Finance Act 1975 shall have effect with the following amendments.

• (2) In sub-paragraph (1), for the words "the value of the estate of the transferor's spouse is increased" there shall be substituted the words " the value transferred is attributable to property which becomes comprised in the estate of the transferor's spouse or, so far as the value transferred is not so attributable, to the extent that that estate is increased ".

• (3) In sub-paragraph (2)—

• (a) for the words from " transfer is exempt " to " does not " there shall be substituted the words " value in respect of which the transfer is exempt (calculated as a value on which no tax is payable) shall not ";

• (b) for the words " less any increase " there shall be substituted the words " less any amount ".

Exempt transfers: modification of exceptions

95

• (1) Paragraph 15 of Schedule 6 to the Finance Act 1975 shall be amended as follows.

• (2) In sub-paragraph (3), in paragraph (b) the words " is given subject to an interest reserved or created by the donor or " shall be omitted and after that paragraph there shall be inserted—

(ba) the property is an interest in possession in settled property and the settlement does not come to an end in relation to that settled property on the making of the transfer; or (bb) the property is land or a building and is given subject to an interest reserved or created by the donor which entitles him, his spouse or a person connected with him to possession of, or to occupy, the whole or any part of the land or building rent-free or at a rent less than might be expected to be obtained in a transaction at arm's length between persons not connected with each other; or (bc) the property is not land or a building and is given subject to an interest reserved or created by the donor other than— (i) an interest created by him for full consideration in money or money's worth ; or (ii) an interest which does not substantially affect the enjoyment of the property by the person or body to whom it is given ; or

.

• (3) After sub-paragraph (4) there shall be inserted—

(4A) Where a person or body acquires a reversionary interest in any settled property for a consideration in money or money's worth, paragraphs 1 and 10 to 13 above do not apply in relation to the property when it becomes the property of that person or body on the termination of the interest on which the reversionary interest is expectant.

• (4) Subsection (2) above applies in relation to transfers of value made after 15th April 1976 and subsection (3) applies where the acquisition of the reversionary interest is after that date.

Exempt transfers: modification of Supplementary Provisions.

96

• (1) In relation to transfers of value made after 6th April 1976, Part III of Schedule 6 to the Finance Act 1975 shall have effect with the amendments set out in subsections (2) to (6) below.

• (2) In paragraph 16, for sub-paragraph (b) there shall be substituted—

(b) paragraph 22 shall have effect as respects the burden of tax.

• (3) For sub-paragraph (1) of paragraph 19 there shall be substituted—

(1) Such part of the value transferred shall be attributable to specific gifts as corresponds to the value of the gifts ; but if or to the extent that the gifts— (a) are not gifts with respect to which the transfer is exempt or are outside the limit up to which the transfer is exempt, and (b) do not bear their own tax, the amount corresponding to the value of the gifts shall be taken to be the amount arrived at in accordance with sub-paragraphs (3) to (3B) below

.

• (4) For sub-paragraph (3) of paragraph 19 there shall be substituted—

(3) Where the only gifts with respect to which the transfer is or might be chargeable are specific gifts which do not bear their own tax, the amount referred to in sub-paragraph (1) above is the aggregate of— (a) the sum of the value of those gifts, and (b) the amount of tax which would be chargeable if the value transferred equalled that aggregate. (3A) Where the specific gifts not bearing their own tax are not the only gifts with respect to which the transfer is or might be chargeable, the amount referred to in sub-paragraph (1) above is such amount as, after deduction of tax at the assumed rate specified in sub-paragraph (3B) below, would be equal to the sum of the value of those gifts. (3B) For the purposes of sub-paragraph (3A) above— (a) the assumed rate is the rate found by dividing the assumed amount of tax by that part of the value transferred with respect to which the transfer would be chargeable on the hypothesis that— (i) the amount corresponding to the value of specific gifts not bearing their own tax is equal to the aggregate referred to in sub-paragraph (3) above, and (ii) the parts of the value transferred attributable to specific gifts and to gifts of residue or shares in residue are determined accordingly; and (b) the assumed amount of tax is the amount that would be charged on the value transferred on the hypothesis mentioned in paragraph (a) above.

• (5) For paragraph 22 there shall be substituted—

(22) Notwithstanding the terms of any disposition— (a) none of the tax on the value transferred shall fall on any specific gift if or to the extent that the transfer is exempt with respect to the gift; and (b) none of the tax attributable to the value of property comprised in residue shall fall on any gift of a share of residue if or to the extent that the transfer is exempt with respect to the gift.

• (6) At the end of paragraph 23 there shall be added—

(3) Where— (a) the whole or part of the value transferred by a transfer of value is attributable to property which is the subject of two or more gifts, and (b) the aggregate of the values of the property given by each of those gifts is less than the value transferred or, as the case may be, that part of it, then for the purposes of this Part of this Schedule (and notwithstanding the definition of a gift in sub-paragraph (1) above) the value of each gift shall be taken to be the relevant proportion of the value transferred or, as the case may be, that part of it; and the relevant proportion in relation to any gift is the proportion which the value of the property given by it bears to the said aggregate.

• (7) After paragraph 22 of Schedule 6 to the Finance Act 1975 there shall be inserted the following paragraph—

(22A) (1) Where on the death of a person legal rights are claimed by a person entitled to claim such rights, those rights shall be treated as a specific gift which bears its own tax. (2) In determining the value of legal rights mentioned in sub-paragraph (1) above, any capital transfer tax repayable on the estate of the deceased shall be left out of account. (3) In the case of any death occurring after 13th March 1975 and before the passing of the Finance Act 1976, the executors of the deceased may elect that this paragraph shall apply to the estate of the deceased. (4) This paragraph extends to Scotland only

.

Relief for successive charges

97

• (1) Section 30 of the Finance Act 1975 shall have effect, and be deemed always to have had effect, as if for subsection (3) there were substituted—

(3) Where the value of a person's estate was increased— (a) on a death on which estate duty was payable ; or (b) in consequence of— (i) a gift inter vivos ; or (ii) a disposition or determination of a beneficial interest in possession in any property comprised in a settlement, where, by reason of the gift or interest, estate duty or capital transfer tax under section 22(5) of this Act was payable on a subsequent death, the preceding provisions of this section shall apply with the necessary modifications and, in particular, as if the increase had been by a chargeable transfer on the occasion of the death and, in a case where estate duty was payable, that duty had been tax on the value transferred thereby.

• (2) Paragraph 5 of Schedule 5 to the said Act of 1975 shall have effect, and be deemed always to have had effect, as if for sub-paragraph (2) there were substituted—

(2) Where the transferor became entitled to the interest— (a) on a death on which estate duty was payable in respect of the settled property ; or (b) in consequence of— (i) a gift inter vivos ; or (ii) a disposition or determination of a beneficial interest in possession in any property comprised in a settlement, where, by reason of the gift or interest, estate duty or capital transfer tax under section 22(5) of this Act was payable on a subsequent 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.

Gifts to spouses-relief from transitional charge

98

For the purpose of determining in relation to a death after 6th April 1976 whether any increase is to be made in the deceased's estate by virtue of section 22(5) of the Finance Act 1975 (which provides for such an increase in certain cases where, by reason of a gift or an interest in possession under a settlement, property would have been within the charge to estate duty), section 121(1)(c) of the Finance Act 1972 (relief from estate duty for gifts etc. to the deceased's widow or widower) shall have effect as if the reference to a widow or widower included a reference to a spouse who died before the deceased.

Transfers within three years before death

99

• (1) Subject to the following provisions, this section applies where additional tax becomes chargeable in respect of the value transferred by a chargeable transfer because of the transferor's death within three years of the transfer and all or part of the value transferred is attributable to the value of property (" the transferred property ") which—

• (a) is, at the date of the death, the property of the person (" the transferee ") whose property it became on the transfer or of his spouse, or

• (b) has, before that date, been sold by the transferee or his spouse by a qualifying sale ;

and in the following provisions of this section " the relevant date " means, in a case within sub-paragraph (a) above, the date of the death, and in a case within sub-paragraph (b), the date of the qualifying sale.

• (2) If the market value of the transferred property at the time of the chargeable transfer exceeds its market value on the relevant date, the additional tax shall be calculated as if the value transferred were reduced by the amount of the excess.

• (3) This section shall not apply unless—

• (a) the transferor's death occurs after 6th April 1976, and

• (b) a claim is made by a person liable to pay the whole or part of the additional tax.

• (4) This section shall not apply if the transferred property is tangible movable property that is a wasting asset, and in other cases shall apply subject to the provisions of Schedule 12 to this Act.

• (5) For the purposes of this section the market value at any time of any property is the price which the property might reasonably be expected to fetch if sold in the open market at that time; but—

• (a) that price shall not be assumed to be reduced on the ground that the whole property is on the market at one and the same time ; and

• (b) paragraph 13 of Schedule 10 to the Finance Act 1975 shall apply as it applies for determining the value of unquoted shares and securities for the purposes of tax.

• (6) A sale is a qualifying sale for the purposes of this section if—

• (a) it is at arm's length for a price freely negotiated at the time of the sale ; and

• (b) no person concerned as vendor (or as having an interest in the proceeds of the sale) is the same as or connected with any person concerned as purchaser (or as having an interest in the purchase); and

• (c) no provision is made, in or in connection with the agreement for the sale, that the vendor (or any person having an interest in the proceeds of sale) is to have any right to acquire some or all of the property sold or some interest in or created out of it.