ESTATE DUTIES. From early times the occasion of death has provided a convenient opportunity for the sovereign or the state to participate in the reckoning which necessarily follows a man's death. The casualties incident to feudal tenure were in effect taxes on successions to property levied by the sovereigns of England through the "inquisitio post mortem." The court of wards and liveries established by Henry VIII. regulated these enquiries until its abolition in the reign of Charles II. Death duties as such first appeared upon grants of probate and admin istration, being copied from Holland in June, 1694, during the reign of William and Mary. Imposed first at a low rate of only 5s. for each probate for property above £20 in value, the duties between 1779 and 1797 were charged on an ascending scale. Under the influence of the Napoleonic Wars the rates were further increased and the graduation extended up to estates of the value of f sterling. In 1804 a probate duty similar to that in force in England was imposed in Scotland. Another succession tax was first imposed in Great Britain in 1780, when stamps were required on receipts for legacy. When it was discovered that by the absence of a receipt the duty would be avoided a further act was passed in 1796 by which the duty was imposed upon the legacy. The act was confined to legacies of personal estate—a hill proposed by Pitt for similar duties on legacies charged upon and devises of real estate having been withdrawn. This legacy duty distinguished the recipients of legacies according to the nearness or remoteness of their relationship with their bene factor. At the beginning the lowest rate was 2% for brothers and sisters and their descendants and the highest rate was 6% for strangers in blood.
In 1805 the charge of legacy duty was extended to testamentary gifts of the proceeds of sales of real property but it was not until 1853, by the Succession Duty Act of that year, that (under the name of succession duty) a death duty corresponding in principle to the legacy duty was thrown on acquisitions of two main categories of property which had previously escaped the charge of a death duty. These consisted of personal property which was not previously liable to legacy duty, composed mainly of settled movable property, and real property. After the intro duction of the new duty, leasehold property devolving under a will or intestacy was charged therewith instead of with legacy duty, and in 1888 succession duty replaced the legacy duty which since 1805, as already noted, had been charged on testamentary gifts of the proceeds of sale of real property.
Another succession duty, known as account duty, was imposed in 1881 and partook of the nature of a preventive of the evasion of probable duty rather than of a new tax. It was confined to personal or movable property and imposed upon such descrip tions of property as property taken as donatio mortis causa, and property passing under any voluntary settlement by deed or any other instrument not taking effect as a will, whereby an interest in the property for any period determinable by death was re served to the settlor. Temporary estate duty was introduced in 1889 at the rate of 1 on all personal property exceeding the value of L10,000 passing by will or intestacy or included in "Ac count" and also on successions exceeding the value of . 10,000. This tax was levied in addition to the probate and legacy or suc cession duties.
In 1894 the littered state of this part of the field of taxation was partially cleared up by the imposition of the estate duty and the sweeping away of the probate duty (which in Scotland had come to be called inventory duty), account duty and temporary estate duty. These taxes, however, remained leviable in con nection with deaths which occurred during specified periods, the last of which did not expire until May 12, 1914. Three duties are left, which fall into two classes. The first class is represented by the estate duty—a duty payable with reference to the acquisi tion of property on death ; the second class comprises the old legacy duty and succession duty, each of which, as already stated, is a duty payable with reference to the acquisition of property by beneficiaries. Details of the present legacy duty and succession duty are given under the head of LEGACY DUTY.
2. Property so passing includes the following : (a) Property of which the deceased was at the time of death competent to dispose (e.g., by the exercise of a general power of appointment), whether actually disposed of or not.
(b) Gifts made by the deceased during illness, in contempla tion, and intended only to become absolute in case of death (dona tiones mortis causa).
(c) Gifts made by the deceased inter vivos without reservation within three years preceding death (excluding, however, gifts made for public or charitable purposes more than 12 months before his death; gifts made in consideration of marriage; reasonable gifts proved to have been part of his normal expenditure; and gifts not exceeding f roc) in value in case of any donee).
(d) Gifts made by the deceased inter vivos, at any time, if bona fide possession of the gift was not immediately assumed and thenceforth retained by the donee to the entire and irrevocable exclusion of the donor.
(e) Property which the deceased had voluntarily transferred from his own absolute ownership to the joint ownership of himself and some other person so that some beneficial interest therein passed by survivorship on his death to such other person.
(f) Moneys receivable under policies of insurance on the life of the deceased, effected and kept up by him wholly or partially for the benefit of a donee.
(g) Any annuity (subject to minor exceptions) or other in terest, which the deceased provided, either alone or with some other person, to the extent of the beneficial interest arising by survivorship on his death.
(h) Property in which the deceased, or any other person, had an interest ceasing on the death of the deceased, to the extent to which a benefit arises by the termination of that interest.
(i) Property passing under any instrument executed by the deceased (not taking effect as a will) under which he reserved an interest, or any right to resume his interest, in the property.
3. Immovable property situate out of Great Britain, devolving as such, is not liable to estate duty in any circumstances.
4. Movable property situate out of Great Britain is, speaking generally, only chargeable with estate duty either (i.) when the deceased was the owner and was domiciled in some part of Great Britain; or (ii.) when the deceased was only interested for life, and at his death the property formed the subject of a British trust or was vested in a British trustee.
5. Immovable property means lands and houses and all in terests therein, including leasehold interests; movable property includes all other property, whether tangible (such as goods, furni ture, etc., having a physical situation), or intangible (such as stocks, shares, securities, etc., which, in strictness, consisting only of rights, have no physical situation).
Provision is made for two fixed duties in the case of estates not exceeding a gross value of (a) £300, and (b) f5o0, viz., 3os. and 5os. respectively. The net principal value of the estate is rep resented by the aggregation of the principal values of all the items of property, less deductions for reasonable funeral expenses, and, subject to certain restrictions, for debts and encumbrances in curred or created by the deceased bona fide for full consideration. The principal value of any property is defined to be the price which, in the opinion of the commissioners of inland revenue, the property would fetch if sold in the open market at the time of the death of the deceased. The rule of aggregation for determination of the net principal value subject to duty is, however, subject to certain complex exceptions.
7. The statutes provide for exemptions of certain property from estate duty, among which may be mentioned (a) the exemption of estates of a total net principal value not exceeding £zoo; (b) the exemption of the property of common seamen, marines, sol diers or airmen who are slain or die in His Majesty's service; (c) the exemption, or partial exemption (i.) of the property passing on the death of certain persons killed in war, (ii.) of cer tain pensions granted by the Government of British India, (iii.) of perpetual rights of presentation to ecclesiastical ,benefices, and (iv.) of certain articles which are ascertained to be of national, scientific, historic or artistic interest. Moreover, certain British Government securities issued during the World War, and during a further period of one year after its termination, are also (under the terms of their issue), expressly exempted from the duty when held by persons who are neither domiciled nor ordinarily resident in the United Kingdom.
8. To avoid double taxation of movable property situated in a British dominion which, by reason of the same death is liable (i.) to the British estate duty (in the circumstances mentioned in paragraph 4 above) and (ii.) to a death duty in the dominion, arrangements exist under statutory powers by which, when certain conditions are fulfilled, such property pays only so much duty as is equal to the larger of the two taxes.
9. The accompanying table shows the value of estates liable to duty and the net receipt of the duty for the average of the three pre-war years, 1911-12, 1912-13, 1913-14, and for the two years 1925-26 and 1926-27.
BIBLIOGRAPHY. Inland Revenue Reports (13th, 28th, 65th and Bibliography. Inland Revenue Reports (13th, 28th, 65th and Current reports), British Death Duty Acts (and supplement No. 1, 1926), 1796-1924; Soward and Scott, Law and Practice of the Estate Duty; Dymond & Green, The Death Duties; Soward & Willan, The Taxation of Capital; F. H. L. Errington, Hanson's Death Duties; W. J. Schultz, The Taxation of Inheritance. (W. H. C.)