Wednesday, 1 June 1932
Dáil Éireann Debate
(1) That Rule 18 (which relates to the assessment of executors and administrators of deceased persons) of the General Rules applicable to Schedules A, B, C, D, and E, of the Income Tax Act, 1918, shall be repealed, and the following Rule shall be inserted in the said General Rules in lieu of the said Rule so repealed and shall have effect in relation to assessments made after the passing of the Act enacting the provisions of this Resolution in respect of tax chargeable for any year of assessment whether beginning before or after the passing of that Act, that is to say:—
18. (1) Where a person dies whether before on, or after the 6th day of April 1932, an assessment or an additional first assessment (as the case may be), may be made for the year of assessment in which such person dies or for
 any one or more of the six years next preceding that year in respect of the profits or gains which arose or accrued to such person before his death, and the amount of the tax on such profits or gains shall be a debt due from and payable out of the estate of such person, and the executor or administrator of such person shall be assessable and chargeable in respect of such tax.
(2) No assessment under this rule shall be made later than six years after the expiration of the year of assessment nor, in any case, later than three years after the expiration of the year of assessment in which the deceased person died.
(3) The executor or administrator of any such deceased person shall, when required by a particular notice so to do, prepare and deliver to the inspector of taxes a true and correct statement in writing signed by such executor or administrator and containing particulars, to the best of his judgment and belief, of the profits or gains which arose or accrued to such deceased person before his death and in respect of which such executor or administrator is assessable under this rule, and the provisions of the Income Tax Acts relating to statements to be delivered by any person shall apply, with any necessary modifications, to statements to be delivered under this rule.
(2) That the references in sub-section (3) of Section 10 of the Finance Act, 1929 (No. 32 of 1929), to a person ceasing to possess a source of income or profits shall be construed as referring to a cesser occurring by reason of the person dying while in possession of the source of income or profits as well as to a cesser occurring in the lifetime of such person, and for the purposes of  the said sub-section (3), such death shall be deemed to cause a cesser, and such cesser shall be deemed to take place on the day of such death, and the said Section 10 shall apply and have effect accordingly.
(3) That the references in sub-section (1) of Section 12 of the Finance Act, 1929 (No. 32 of 1929), to the discontinuance of a trade, profession, or vocation shall be construed as referring to a discontinuance occurring by reason of the death while carrying on such trade, profession, or vocation of the person carrying on the same as well as to a discontinuance occurring in the lifetime of such person, and for the purposes of the said Section 12 such death shall be deemed to cause a discontinuance, and such discontinuance shall be deemed to take place on the day of such death, and the said section shall apply and have effect accordingly.
Paragraph 1 deals with Rule 18 of the General Rules of the Income Tax Act of 1918. It provides that where any person dies, without having delivered a statement of all his profits or gains, an assessment in respect of such profits or gains may be made on his executors. A case recently arose in which a person having an income of over £2,000 a year made a complete return and died about a week before the assessment was signed. The Special Commissioners, on appeal, held that the existing rules did not enable an assessment to be made on the executors. The resolution substitutes a new rule which enables an assessment to be made on the executors, whether a return has been made or not. Some questions have been raised in other cases as to whether the Acts create any charge on executors, and words are introduced in the new Rule expressly providing that the executor or administrator shall be assessable and chargeable. The new Rule is so drafted as to enable  assessments to be made for past years, subject to the time limit in sub-clause 2, but does not operate to validate any assessments already made. It merely enables assessments, including assessments for certain past years, to be made after the passing of the Act.
Sub-clause 2 of the new Rule provides that assessments made under the preceding sub-clause shall be made not later than six years after the expiration of the year of assessments, but any such assessments must be made not later than three years after the expiration of the fiscal year in which the deceased died. There is no change in the law in regard to this time limit. The existing provisions embodied in Section 8 of the Finance Act of 1925, as amended by Section 2 of the Finance Act of 1921, are to the same effect.
Sub-clause 3 of the new Rule provides for the making of returns by executors, to the best of their judgment and belief, in respect of profits or gains which accrued to a deceased person for any year for which an assessment could be raised under sub-clause 1. At present, there is no power to require an executor to make a return in respect of the income of a deceased person. It is to be observed that, under the law as it stands, if an executor desires to make a return, he may be faced with the position that he could be challenged in respect of any expenses being incurred in the preparation of the return. As the sub-clause imposes a statutory liability on the executor, the executor will, in future, be entitled to have any expenses which he incurs borne by the estate.
Sub-clause 4 of the new Rule is designed to exclude from the operation of the new Rule, cases of the profits of a trade, profession or vocation carried on in partnership. A partnership is assessable in one sum on the whole of the profits and it would obviously be unreasonable to require the executor of one partner to make a return of the profits of the partnership business concerning which he might have no information.
Paragraph 2 of the Resolution deals  with the position which is being created by Section 10, sub-section (3), of the Finance Act, 1929, which enacts that, in the case of a person ceasing to possess certain investment income, the provisions of Section 12 of the same Act relating to the permanent, discontinuance of a trade or business, shall be applied. These latter provisions are to the effect that the proprietor of the business shall be assessed for the year in which the trade is discontinued, on the actual profits of that year up to the date of discontinuance, and may also be assessed for the preceding year on the actual profits of that year if such profits exceed the amount of the assessment for that year. The Revenue Commissioners are advised that Section 10 of the Act is not applicable in the case of a deceased person, unless he ceases to possess the income or profits before his death. The new paragraph is designed to remedy that defect. In the case of paragraph 3 of the Resolution, the point is the same as in paragraph 2. It arises under Section 12 (2) of the Finance Act, 1929, which reads as follows:
In the case of the death of a person who, if he had not died, would, under this section, have become chargeable to income tax for any year, the tax which would have been so chargeable shall be assessed and charged upon his executors or administrators, and shall be a debt due from and payable out of his estate.
As the law stands at present—I am sorry that Deputy O'Sullivan is bored, but the general public may take more interest in this than he does—the Revenue Commissioners are advised that it is necessary that two independent things should happen in order to enable this paragraph to operate. First, that the trade should have been discontinued during the lifetime of the person chargeable, and that the person should subsequently die during the year of assessment. The paragraph is designed to make the 1929 section applicable in a case in which the trade, profession or vocation is discontinued on the death.
Paragraph 4 of the Resolution provides  for the removal of certain words from Section 7 (2) of the Income Tax Act, 1918, relating to sur-tax. The present position is that an executor who is chargeable to income tax in respect of the profits of a testator is liable to make a return for sur-tax. Owing to the fact that sur-tax is assessed and charged after the end of the year of assessment, and payable a year late, this position gives rise to difficulties in certain cases. For instance, a person dies on 31st March, 1931, having made a return, and having been duly assessed for income tax, in relation to the year 1930-31. The sur-tax for the year 1930-31 would be assessed during the year 1931-32, and payable on the 1st January, 1932. The executor of this particular person would not be assessable for income tax for the year 1930-31, and, therefore, could not be called on to make a return for sur-tax for that year. The paragraph is necessary to enable sur-tax-assessments to be made in such cases.
Mr. McMenamin: I would like to ask the Minister a few questions arising out of this. Under paragraph 1 he seeks power to make an assessment for income tax on the executor after a person has died. I would like to know whether or not the Revenue Commissioners will take the sum of which the person died worth, less the income tax, for the purpose of death duties?
Mr. McMenamin: The second point arises on this new Clause as to the allowing of executors' expenses. That seems to me to open a very wide door, and some extra provision will have to be made. It will require some provision for the auditing or taxation of these expenses, because, if it is left in this omnibus way, it will open the door to perhaps serious demands by these men on the estates of deceased persons.
Mr. MacEntee: That point might more profitably be dealt with on Committee Stage, because we cannot have question and answer, but I would say  this, that we would have no power to interfere with the executors like that. The heirs would be the people who would be bound to ensure that the executor kept within reasonable limits. The only thing we are entitled to do is to make the executor responsible to the Exchequer for making a return. The expenses he would be called to bear, in that case, would, I presume, relate to the size of the estate, and the difficulty of making a return, and the Revenue Commissioners would be reasonable in a matter like that.
Prof. Thrift: From the point of view of the executor, I want to put a question. It seems to me that this Resolution may make the executor's position in distributing the estate very much more difficult and that it may be necessary for him to go back over the last six years of the deceased person's affairs and find out, so far as possible, whether full income tax has been paid on the receipts for those six years before he can safely distribute. Would the Minister tell me what margin the executor will have to allow, in time, before he can secure distribution of the estate so as to safeguard himself, after distribution, from a charge for income tax?
Mr. MacEntee: The executor will be, I suggest, fully secure three years after the year of death. We are making no change in the law in that regard. One of the effects of sub-clause (2) is that  the executor will be entitled to charge the expense of making the return against the estate.
Prof. Thrift: I am not concerned with the question of expense at all. The Minister's answer, so far, suggests to me that it would not be safe for an executor to distribute the estate of the testator completely until three years had lapsed.
Mr. MacEntee: If they get a satisfactory return, they can. The executor is now in the position that he can charge the expense of making such a satisfactory return against the estate of the testator, whereas before he would probably have to do that at his own expense if the matter were challenged in the court.
Professor Thrift: How, under this Resolution can the Revenue Commissioners give a certificate to the executor as to all the sources of income of the deceased unless the executor has gone back over six years of the testator's revenue and expenditure, so as to satisfy the Commissioners that all revenue claims for that period have been met?
Mr. MacEntee: There is no change in the law in that respect. As the law stands at present, the executor is bound to make a statement that he has furnished a true and correct return to the best of his knowledge and belief. That is the law. He has to continue to do that.
Mr. Blythe: As I understand, this Resolution prevents any difficulty arising in cases where the deceased has made a return but has not been assessed before death and, secondly, it makes it obligatory on executors to furnish a return, whereas in the past, although there was power to assess, there was no power to compel a return.
Mr. MacEntee: It is the Resolution which makes the McKenna duties permanent. Deputy Blythe, who is, I suppose, entitled to speak for the Opposition in this connection, commended this Resolution to the House as one of the good things in the Budget.
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