Inheritance Tax and Gift Tax

Capital Acquisitions Tax

This tax is charged on the taxable value of the gift or inheritance. The taxable value is arrived at by deducting from the market value of the property comprised in the gift or inheritance permissible debts and incumbrances and any consideration paid by the beneficiary.

Once the taxable value of the gift or inheritance has been determined the amount of tax payable will depend on whether the appropriate tax-free threshold has been exceeded. The rates of tax are as follows

The threshold amount – Nil
Excess 33%*
*This rate was introduced on 6th December, 2012

Previous rates:
30% for gifts and inheritances taken between 7th December, 2011 – 5th December 2012 inclusive
25% for gifts and inheritances taken between 8th April, 2009 and 6th December, 2011 inclusive

Indexed Tax Thresholds for C.A.T. for 2011/2012

For the purpose of Gift and Inheritance Tax, the relationship between the person who provided the gift or inheritance (i.e. the Disponer) and the person who received the gift or inheritance (i.e. the beneficiary), determines the maximum tax free threshold – known as the “group threshold”. The group thresholds are increased each year in line with inflation.

The indexed Group thresholds for 2011 and 2012 are set out in the table below

The indexed group thresholds for 2011 and 2012
Group	Relationship to Disponer	Group Threshold 1/1/2011 – 6/12/2011	Group Threshold 7/12/2011 – 5/12/2012	Group Threshold from 6/12/2012
A	Son/Daughter	€332,084	€250,000	€225,000
B	Parent*/Brother/Sister/ Niece/Nephew/Grandchild	€33,208	€33,500	€30,150
C	Relationship other than Group A or B	€16,604	€16,750	€15,075

*In certain circumstances a parent taking an inheritance from a child can qualify for Group A threshold.

Gifts or inheritances of Irish property are liable to tax whether or not the disponer is resident or domiciled in Ireland. Foreign property is liable to tax where either the disponer or the beneficiary is resident or ordinarily resident in Ireland at the relevant date.

Various exemptions from gift and Inheritance Tax have been provided for. For example, the first €3,000 taken as a gift by a beneficiary from a disponer in any one year is exempt from tax as are gifts and inheritances taken by one spouse from the other. There are exemptions in favour of certain charities, heritage property, superannuation benefits, and foreign donees of certain Irish government securities. Qualifying insurance policies to the extent that they are utilised in the payment of certain Gift Tax or Inheritance Tax are also exempt. A dwelling house taken as a gift or inheritance is exempt in certain circumstances.

CAT: Exemption for Family Home

The Finance Bill will confirm that CAT will no longer apply to the transfer of the home on or after 1 December 1999 provided it is the principal private residence of the disponer and/or the recipient and the recipient has been living in the home for the 3 years prior to the transfer and provided also that the recipient does not have an interest in any other residential property. It will also be a condition of the relief that the recipient must own and reside in the house for 6 years after the transfer. This condition will not apply to recipients over 55 years of age and provision will be made for those circumstances where the recipient is unable to comply with the residence requirement for reasons outside their control e.g. due to hospitalisation or work obligations. This residence condition is a change from the Budget announcement where the condition was that the recipient does not dispose of the home for 6 years after transfer.

There are a number of further C.A.T. exemptions and reliefs which may be appropriate. It is also important when drafting your Will that full tax estate planning is considered.

Should you have any queries please do not hesitate to contact our offices at (01)8728233 or by e-mail at bg@bowlergeraghty.ie