Capital Acquisition Tax
Are you aware that if you receive a gift or inheritance from someone you may be liable to pay Capital Acquisition Tax?
Did you know there are certain reliefs and exemptions that you may be entitled to in order to reduce this tax payment?
For further information please read article below and if you have any queries do not hesitate to leave your contact details on our web site and we will contact you as soon as possible.
The gift or inheritance is taxed if its value is over a certain limit or threshold. Different tax-free thresholds apply depending on the relationship between the disponer (the person giving the benefit) and the beneficiary (the person receiving the benefit).
The tax applies to all property that is located in Ireland. It also applies where the property is not located in Ireland but either the person giving the benefit or the person receiving it are resident or ordinarily resident in Ireland for tax purposes.
Group thresholds
Gifts and inheritances can be received tax-free up to a certain amount. The tax-free amount, or threshold, varies depending on your relationship to the person giving the benefit. There are three different categories or groups.
Group A applies in case of child/foster child/ or a minor child of a deceased child
Group B applies in the case of a lineal ancestor, lineal descendant, brother, sister, or child of a brother or sister.
Group C applies to any relationship not included in Group A or Group B.
If you receive a benefit from a relation of your deceased spouse or civil partner, you can be assessed with the same group as your spouse or civil partner would be if they were receiving the benefit from their relation.
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CAT thresholds |
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| 2009 (up to 7 April 2009) | 2009 (on or after 8 April 2009) | 2010 (up to 7 December 2010) | 2010 (on or after 8 December 2010) and 2011 | 2011 (on or after 7 December 2011) and 2012 | |
| Group A | €542,544 | €434,000 | €414,799 | €332,084 | €250,000 |
| Group B | €54,254 | €43,400 | €41,481 | €33,208 | €33,208 |
| Group C | €27,127 | €21,700 | €20,740 | €16,604 | €16,604 |
Valuation
The valuation date is the date on which the market value of the property comprising the gift/inheritance is established.
In the case of a gift, the valuation date is normally the date of the gift.
In the case of an inheritance, the valuation date is normally the earliest of the following dates:
- The date the inheritance can be set aside for or given to the beneficiary
- The date it is actually retained for the benefit of the beneficiary
- The date it is transferred or paid over to the beneficiary
The valuation date will normally be the date of death in the following circumstances:
- Gift made in contemplation of death (Donatio Mortis Causa)
- Where a power of revocation has not been exercised. This could arise where a person makes a gift of property but reserves the power to revoke, or take back, the gift. If he or she dies and this power ceases, the recipient then becomes taxable as inheriting the benefit. If the beneficiary had free use of the benefit before this, he or she will be taxed as receiving a gift of the value of the use of the property.
Taxable value
The gift or inheritance is valued as the market value at the time you become entitled to the use or benefit of it.
The value that is taxable is the market value minus the following deductions.
You can deduct ‘any liabilities, costs and expenses that are properly payable’. This would include debts that must, by law, be paid and that are payable out of the benefit or because of it. With an inheritance, these may be funeral expenses, the costs of administering the estate, or debts owed by the deceased. For a gift, they could include legal costs or stamp duty.
Tax rate
Capital Acquisitions Tax is charged at 30% in respect of gifts or inheritances made on or after 7 December 2011 (the rate was formerly 25%). This only applies to amounts over the group threshold.
Exemptions
The following are exempt from Capital Acquisitions Tax:
- Gifts or inheritances from a spouse or civil partner
- Payments for damages or compensation
- Benefits used only for the medical expenses of a person who is permanently incapacitated due to physical or mental illness
- Benefits taken for charitable purposes or received from a charity
- Winnings from a lottery, sweepstake, game, or betting
- Retirement benefits and pension and redundancy payments are not usually liable to Gift Tax
- A gift or inheritance of a house which has been your main residence may be exempt from Capital Acquisitions Tax if you do not own or have an interest in any other house.
The first €3,000 of the total value of all gifts received from one person in any calendar year is exempt. This does not apply to inheritances.
Other exemptions relate to certain Irish Government securities, bankruptcy, heritage property, and support of a child or spouse.
Reliefs
Business Relief
There is a possible business relief available that can reduce the taxable value of a business property by 90%.
Agricultural Relief
There is also a possible agricultural relief that can reduce the market value of the property by 90% for the purposes of Capital Acquisitions Tax.
Heritage Property Relief
Houses and gardens or objects that are of national, scientific, historic or artistic interest are exempt from Capital Acquisitions Tax if they meet certain conditions.
For further information to avail of these exemptions or reliefs please leave your query and e-mail address on our web site and we will assist you in any way we can