HC Deb 27 October 1966 vol 734 cc1450-5

Gross principal value

5.—(1) Subject to the following provisions of this paragraph, for the purposes of this Schedule the gross principal value of the dutiable interest shall be taken to be an amount equal to the principal value of that interest as, for the purposes of estate duty leviable on the death of the deceased, that value was or is—

  1. (a) agreed between the person accountable for estate duty in respect of that interest and the Commissioners of Inland Revenue, or
  2. (b) determined in proceedings between them.

(2) Where the principal value of the dutiable interest has not been so agreed or determined, but for the purposes of estate duty leviable on the death of the deceased the principal value—

  1. (a) of the whole of his estate, or
  2. (b) of a part of his estate which includes the dutiable interest,
has been agreed between the person accountable for the duty and the Commissioners of Inland Revenue, or has been determined in proceedings between them, that value as so agreed or determined shall be apportioned, in such manner as may be appropriate in the circumstances, as between the duitable interest and the remainder of the estate or of that part of the estate, as the case may be; and so much of that value as is apportioned to the dutiable interest shall for the purposes of this Schedule be taken to be the gross principal value of the dutiable interest.

(3) Where for the purposes of estate duty leviable on the death of the deceased the principal value of the dutiable interest was or is reduced under section 64 of the Finance Act 1960, any reference in the preceding sub paragraphs to the value as agreed or deter mined shall be construed as a reference to that value as agreed or determined apart from any reduction under that section.

Modified value

6. The modified value of the dutiable interest shall be ascertained in accordance with paragraphs 7 to 10 of this Schedule.

7. Where the dutiable interest was the chargeable interest, and for the purpose of assessing levy in respect of the chargeable act or event the base value of the relevant interest (or, in Case B, the base value realised by the disposition which constitutes the chargeable act or event) does not fall to be ascertained separately in relation to different parts of the chargeable unit in accordance with paragraph 14 of Schedule 7 to this Act, then (subject to paragraph 8 of this Schedule)—

  1. (a) if the chargeable act or event falls within Case A, or within any of Cases C to E, and paragraph 7 of Schedule 5 to this Act has effect for the purpose of assessing levy in respect of it, the modified value of the dutiable interest shall be taken to be an amount equal to the amount of the consideration given for the last relevant disposition;
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  2. (b) if the chargeable act or event falls within any of those Cases, but paragraph 7 of Schedule 5 to this Act does not have effect for the purpose of assessing levy in respect of it, the modified value of the dutiable interest shall be taken to be an amount equal to eleven-tenths of the current use value of the relevant interest, as ascertained under Schedule 4 to this Act;
  3. (c) if the chargeable act or event falls within Case B, and paragraph 16 of Schedule 5 to this Act has effect for the purpose of assessing levy in respect of it, the modified value of the dutiable interest shall be taken to be an amount equal to the amount of the consideration given for the last relevant disposition;
  4. (d) if the chargeable act or event falls within Case B, but paragraph 16 of Schedule 5 to this Act does not have effect for the purpose of assessing levy in respect of it, the modified value of the dutiable interest shall be taken to be an amount equal to eleven-tenths of the current use value of the chargeable interest, as ascertained under Part II of Schedule 4 to this Act.

8.—(1) The references in sub-paragraphs (a) and (c) of the last preceding paragraph to the amount of the consideration given for the last relevant disposition shall be construed subject to the following provisions of this paragraph.

(2) Where, in the circumstances specified in either of those sub-paragraphs, the amount of the consideration given for the last relevant disposition falls to be adjusted in accordance with paragraph 9 or paragraph 14 of Schedule 5 to this Act, any such reference to the amount of that consideration shall be construed as a reference to that amount as so adjusted.

(3) In so far as any regulations made under paragraph 10 of Schedule 7 to this Act require any adjustment to be made for the purposes of Schedule 5 to this Act, those regulations may provide that references in sub-paragraphs (a) and (c) of the last preceding paragraph to the amount of the consideration given for the last relevant disposition shall be construed subject to such modifications as may be specified in the regulations.

9. Where either of the following conditions is fulfilled, that is to say—

  1. (a) in accordance with paragraph 14 of Schedule 7 to this Act, the base value of the relevant interest (or, in Case B, the base value realised by the disposition constituting the chargeable act or event) falls to be ascertained separately in relation to different parts of the land in which the chargeable interest subsists, or
  2. (b) the dutiable interest was an interest in part (but not the whole) of that land,
or where both of those conditions are fulfilled, paragraphs 7 and 8 of this Schedule shall have effect subject to such modifications for securing the separate ascertainment of the matters referred to in those paragraphs in relation to different parts of that land, and subject to such provisions (if any) as to apportionment and as to aggregation of amounts apportioned, as are appropriate in the circumstances.

10. Where the chargeable act or event falls within Case F, the modified value of the dutiable interest shall be ascertained in such manner as may be prescribed by regulations made under this Schedule.

Excess gross value

11. There shall then be ascertained the amount (if any) by which the gross principal value of the dutiable interest exceeds the modified value of that interest; and that amount is in the following provisions of this Schedule referred to as the excess gross value of the dutiable interest.

Net principal value

12. For the purposes of this Schedule the net principal value of the dutiable interest shall be ascertained in accordance with paragraphs 13 to 19 of this Schedule.

13. Where at the death of the deceased the dutiable interest was subject to a mortgage or heritable security, and for the purposes of estate duty leviable on that death the sum secured by that mortgage or heritable security, or part of that sum, fell or falls to be deducted from the value of the dutiable interest, then for the purpose of ascertaining the net principal value of the dutiable interest that sum, or that part of it, as the case may be, shall be deducted from the gross principal value of that interest.

14.—(1) There shall also for that purpose be deducted from the gross principal value of the dutiable interest so much (if any) of the funeral expenses and (subject to the next following sub-paragraph) so much of the debts and liabilities of the deceased (other than debts secured by a mortgage or heritable security to which the dutiable interest was subject) as for the purposes of estate duty leviable on his death was or is allowable as a deduction from the value of the dutiable interest.

(2) The preceding sub-paragraph does not apply to any liability in respect of capital gains tax chargeable on chargeable gains deemed to accrue on the death of the deceased or otherwise chargeable in consequence of his death.

15.—(1) The provisions of this paragraph shall have effect where, by virtue of section 24 of the Finance Act 1965, a taxable disposal of the dutiable interest is deemed to have occurred on the death of the deceased and a gain deemed to have accrued on that disposal (in this paragraph referred to as 'the gain attributed to the disposal') is included among the gains accruing to the deceased in the year of assessment in which he died.

(2) Subject to paragraph 17 of this Schedule, for the purpose of ascertaining the net principal value of the dutiable interest—

  1. (a) there shall be deducted from the gross principal value of that interest so much of the capital gains tax (if any) chargeable in respect of chargeable gains accruing to the deceased in that year as would not have been chargeable if the gain attributed to the disposal had not been deemed to accrue; and
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  2. (b) if the whole or any part of the gain attributed to the disposal was not chargeable to capital gains tax in that year because of relief for losses accruing in that year or in any earlier year of assessment, there shall also be deducted the amount of capital gains tax which would have been charged on the gain attributed to the disposal or that part of it if that gain, or that part of it, as the case may be, had been the only gain accruing to the deceased in that year and had all been chargeable to tax.

16.—(1) The provisions of this paragraph shall have effect where, by virtue of section 25 of the Finance Act, 1965, a taxable disposal of settled property is deemed to have occurred on the death of the deceased and a gain deemed to have accrued on that disposal (in this paragraph referred to as 'the gain attributed to the disposal') is included among the gains accruing to the trustees of the settlement in the year of assessment in which the deceased died.

(2) Subject to the next following paragraph, for the purpose of ascertaining the net principal value of the dutiable interest—

  1. (a) there shall be deducted from the gross principal value of that interest so much of the capital gains tax (if any) chargeable in respect of chargeable gains accruing to the trustees in that year as would not have been chargeable if the gain attributed to the disposal had not been deemed to accrue; and
  2. (b) if the whole or any part of the gain attributed to the disposal was not chargeable to capital gains tax in that year because of relief for losses accruing in that year or in any earlier year of assessment, there shall also be deducted the amount of capital gains tax which would have been charged on the gain attributed to the disposal or that part of it if that gain, or that part of it, as the case may be. had been the only gain accruing to the trustees of the settlement in that year and had all been chargeable to tax.

17.—(1) Subject to the following provisions of this paragraph, where—

  1. (a) for the purpose of assessing levy in respect of a chargeable act or event paragraph 15 or paragarph 16 of this Schedule has effect by reference to a taxable disposal deemed to have occurred on the death of the deceased (in this paragraph referred to as 'the first taxable disposal'), and
  2. (b) for the purpose of assessing levy in respect of a subsequent chargeable act or event that paragraph falls to be applied by reference to another taxable disposal deemed to have occurred on that death,
any reference in that paragraph to the tax chargeable in respect of gains accruing to the deceased or to the trustees of the settlement in the year of assessment in which the deceased died shall be construed as a reference to the tax which would have been so chargeable if the gain deemed to accrue on the first taxable disposal had not been deemed to accrue.

(2) Where there is a series of three or more chargeable acts or events, and three or more taxable disposals are deemed to have occurred on the death of the deceased, the preceding sub-paragraph shall have effect in relation to each chargeable act or event of the series successively, so that, for the purpose of assessing levy in respect of each subsequent charge able act or event, there is excluded from the calculation of capital gains tax the chargeable gain deemed to accrue on any of those taxable disposals taken into account in ascertaining the net principal value of the dutiable interest in relation to a previous chargeable act or event of the series.

18. Subject to the next following paragraph, the gross principal value of the dutiable interest, reduced by the deductions (if any) required to be made by paragraphs 13 to 17 of this Schedule, shall for the purposes of this Schedule be taken to be the net principal value of that interest.

19. Where under section 64 of the Finance Act 1960 the principal value of the dutiable interest was or is reduced by a percentage specified in that section, then, for the purpose of ascertaining the net principal value of the dutiable interest, the gross principal value of that interest, or, if one or more deductions fall to be made under paragraphs 13 to 17 of this Schedule, so much of it as remains after those deductions have been made, shall be reduced by the like percentage; and the amount resulting from that reduction shall for the purposes of this Schedule be taken to be the net principal value of that interest.

Amount of estate duty attributable to net principal value

20. There shall be ascertained the rate at which estate duty leviable on the death of the deceased would have been payable on the dutiable interest if the following conditions had been fulfilled (whether any of those conditions was in fact fulfilled or not), that is to say—

  1. (a) section 23 of the Finance Act 1925 (which relates to agricultural property) did not apply to the estate of the deceased;
  2. (b) section 28 of the Finance Act 1954 (reduced rate of duty on certain business assets) did not apply to that estate; but
  3. (c) in a case where subsection (1) of section 13 of the Finance Act 1914 (which relates to marginal relief) applied to that estate, the rate of estate duty payable was the lower rate referred to in that subsection,
and in all other respects the circumstances relevant for ascertaining the rate of duty leviable were those which actually existed.

21. There shall then be calculated what amount of estate duty would have been payable in respect of the dutiable interest if—

  1. (a) the amount on which the duty fell to be charged in respect of the dutiable interest had been the net principal value of that interest, and
  2. (b) the rate of duty chargeable in respect of that interest had been the rate ascertained under paragraph 20 of this Schedule,
and in all other respects the circumstances relevant for computing the duty were those which actually existed.

22. For the purposes of the following provisions of this Schedule the amount of estate duty attributable to the net principal value of the dutiable interest shall be taken to be the amount calculated under paragraph 21 of this Schedule.

Effective rate of duly and appropriate allowance

23.—(1) There shall be calculated what proportion the amount of estate duty attributable to the net principal value of the dutiable interest bears to the gross principal value of that interest.

(2) That proportion, expressed as a percentage, is in this Schedule referred to as the effective rate of duty.

24. The appropriate allowance shall then be the amount which bears to the excess gross value of the dutiable interest the proportion which constitutes the effective rate of duty.

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