XIII. Exempt Transactions

24.A100. Certain transactions that might conceivably fall within the ambit of the tax base, as defined in earlier paragraphs, should be expressly exempt from tax.

24.A101. A disposition under a void contract should not constitute a gift. Further, where property is re-conveyed to the taxpayer under a void contract, no liability for duty should arise. However, the Committee recognises that these exemptions, if unqualified, could afford opportunity for avoidance. The exemptions should be available only where it is apparent that the contract was not entered into for the purpose of evading or avoiding duty.

24.A102. A contract for the sale of property may give rise to a gift and any such gift should be taxed at the point when the contract is made. There is usually an interval

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between the date of the contract and the date on which the transfer is effected. During this interval the property may have increased in value. In general, a transfer under a contract should not involve a gift of this increase in value. However, an exception to this principle is referred to in paragraph 24.A17.

24.A103. A disposition by a trustee to a beneficiary, whether giving effect to a resulting trust or otherwise, should not give rise to a gift where it is in accordance with the beneficiary's entitlement to the trust property. This exemption should be available in the case where assets are distributed in specie, even though the trust instrument calls for the trust assets to be converted into cash and for the cash to be distributed.

24.A104. Any transaction between a company and an associated company should be exempt from duty. An associated company ought, for this purpose, to be defined sufficiently widely so as at least to include:

  • (a) a company which is in substance the wholly-owned subsidiary of another company; and
  • (b) a company which is another wholly-owned subsidiary of the company of which the donor is a wholly-owned subsidiary.

Where there is a minority interest involved at any point, the principle in paragraph 24.A82 should apply.