I move: "That the Dáil agree with the Committee in the said Resolution."
Section 1 of the Finance Act, 1894, provides for estate duty being charged on all property "which passes on the death" of a person dying after the 1st August, 1894. Section 2 (1) provides that property passing on the death of the deceased shall be deemed to include inter alia
"(d) Any annuity or other interest purchased or provided by the deceased, either by himself alone or in concert or by arrangement with any other person, to the extent of the beneficial interest accruing or arising by survivorship or otherwise on the death of the deceased."
The object of this sub-section is to prevent a person enabling his estate to avoid payment of estate duty by subtracting from his means during life, monies or money's worth, which, when he dies, are to reappear in the form of a beneficial interest accruing or arising on his death. The commonest types of case which come within the scope of the sub-section are:—
(a) cases of annuities in favour of the widow and/or children of a deceased person which are payable by certain institutions e.g. some of the banks and in respect of which contributions have been made by the deceased in his lifetime;
(b) policies of assurance included in a marriage settlement which have been taken out by the deceased on his life and on which he pays the premiums and the moneys payable in respect of which pass to his widow on his death under the trusts of the marriage settlement;
(c) cases in which a person transfers securities to trustees to be held on trust for his children during his life in such shares as he directs and in which the securities are to be divided amongst the children on his death in such shares as he directs and in default in certain specified shares.
In a case of the last-named type which came before the House of Lords recently, in England, the British Estate Duty Office claimed estate duty under the provisions of Section 1 of the Finance Act, 1894, on the entire of the securities which passed to the children on the deceased's death. The House of Lords held that the securities did not pass under Section 1 at all—they having effectively passed on the execution of the deed— but they held that under sub-section 2 (1), paragraph (d), the beneficial interest of each child in the settled funds, to the extent to which the principal value of such interest on the death of the deceased exceeded the actual value, if any, of the expectant beneficial interest of each child before such death, was an interest accruing or arising on his death and was, therefore, liable to estate duty under sub-section (2) 1, paragraph (d). The effect of this decision is that, in assessing estate duty, an allowance must be made against the value of the securities of the value of the expectant beneficial interest of each child and duty taken only on the value after making such allowance. A Resolution drafted so as to have retrospective effect has been passed by the House of Commons in England prohibiting the making of any such allowance in cases of the kind.
As regards cases coming within (a) above, while they are fairly numerous the amount of duty involved is not large. Cases within (b) are more common and substantial amounts of duty are involved. A typical example would be where A, having insured his life for £1,000 and, on the occasion of his marriage, having assigned the policy to the trustees of his marriage settlement and having covenanted to pay the premiums thereon directed that the trustees should receive the moneys payable under the policy on his death and pay them over to his widow absolutely or hold them on trust for her for life and on her death divide them amongst the children of the marriage. The policy moneys would be liable to estate duty under sub-section 2 (1), paragraph (d), but, if, as is anticipated, the courts here took the same view as the House of Lords, the parties would have to be given an allowance for the value of the widow's expectant interest in these moneys.
The contention put forward on behalf of the taxpayer in the English case has never been put forward in Saorstát Eireann up to the present, and the Resolution merely provides for maintaining the existing practice. As I say, no such case has arisen but we wish to take time by the forelock.
