Inheritance Tax

About Gift/Inheritance Tax

This tax is officially called Capital Acquisitions Tax (CAT) and applies to the beneficiary of an inheritance or gift.

The value of the benefit received which is subject to tax is reduced by an allowance know as the group threshold; there are three group thresholds which are based on the relationship between the giver (donor) of the gift or inheritance and the receiver (referred to as a donee [gift] or successor [inheritance]).

CAT is a self-assessed tax.

• Group A lifetime threshold applicable to transfers from a parent to a child is € 310,000.
• Group B lifetime threshold applicable to transfers between blood relatives. Currently € 32,500.
• Group C lifetime threshold applicable to transfers between strangers. Currently € 16,500.

These thresholds relate to the maximum tax free amount receivable in a lifetime from any donor as opposed to per donor. i.e. the maximum combined amount receivable in a lifetime from all parents is €310,000.

The main body of legislation governing the taxation of gifts and inheritances in Ireland is the Capital Acquisition Tax Consolidation Act 2003 (CATA 2003).

At times CAT may arise on a transaction on which CGT has already been paid (by the person making the gift). In such circumstances the CAT will be reduced by the CGT already paid.

Tax Reliefs

The most common reliefs are listed below. Please note each relief is subject to specific qualifying conditions which we have not listed.

  • Business Relief – provides for a reduction of 90% in the taxable value of business property given as a gift or inheritance.
  • Agriculture Relief – reduces the market value of agricultural property, received as a gift or inheritance, by 90% i.e. only 10% of the market value is taxable.
  • Dwelling House Relief  (as amended by Finance Act 2016), exempts from tax the inheritance of a house. The deceased must have occupied the house as their sole or main residence for 3 years up to the date of the inheritance. The person inheriting the house may not have an interest in any other property at the time and must occupy the property as their sole or main residence for a further 6 years.  **** In the case of a gift the relief will only apply in two situations 1) if it is to a relative aged 65 or over, or 2) is to an incapacitated relative. The person making the gift is not required to have occupied the house as their sole or main residence for the previous 3 years.
  • Inheritances from a spouse or civil partner are exempt from CAT.
  • Small Gifts Exemption – a gift of €3,000 may be taken from any donor in a calendar year tax free.
  • Relief for CGT paid on the same event – in a situation where CGT  (for the giver) and CAT (for the recipient) arise as a result of a gift then CGT paid may be used to reduce the CAT due for the recipient.

Rate of Capital Acquisitions Tax (CAT)

•33%

 

Due Dates

There are specific rules to ascertain when a gift or inheritance is taken; generally it is when the person becomes beneficially “entitled in possession” to the subject matter of the Gift or Inheritance. For a Gift this is normally when the gift is made. In the case of inheritance it is normally the date of death of the deceased person however note that there can be many exceptions to the application of this rule.

The beneficiary must make a full return of aggregated benefits  (taken on or after 5th Dec. 1991) which exceed 80% of the Group Threshold.

The relevant date are as follows:

• 31st October (current year) – filing and payment of CAT on gifts or inheritances with a valuation date between 1st January and 31st August.

• 31st October (following year) – filing and payment of CAT on gifts or inheritances with a valuation date between 1st September and 31st December.

For example:

Any gifts or inheritances received between 1st Sept. 2015 and 31st August 2016 will be due for payment and filing by 31st October 2016 (for persons filing on ROS the date is extended to 10th Nov. 2016).

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