Capital Acquisitions Tax (CAT)

If you receive a gift, you may need to pay a 'gift tax' on it called Capital Acquisitions Tax. For example, if you receive an inheritance following a death, it may be liable to inheritance tax. These taxes are types of Capital Acquisitions Tax.

You’ll pay Capital Acquisitions Tax if a gift is valued over a certain limit and various thresholds apply, depending on the relationship between you (the beneficiary) and the gift giver (the disponer).

There are also a number of exemptions and reliefs depending on the type of gift or inheritance. For example, if you receive a gift or inheritance from your spouse/civil partner, then you’re exempt from Capital Acquisitions Tax.

Also, the tax applies to property in Ireland even if the property isn’t in Ireland when either the person giving the benefit or the person receiving it are resident or ordinarily resident in Ireland for tax purposes.

Different thresholds apply based on the relationship of the giver and the person who receives the gift.

These thresholds apply for gifts/inheritance on or after 12 October 2016.

Group A

This includes a stepchild or adopted child. It can also include a foster child if the child resides with you and was under your care at your own expense for a period or periods totalling at least 5 years before the foster child became 18.

This minimum period doesn’t apply in the case of an inheritance taken on the date of death of the gift giver or disponer. In this case the Group A threshold will apply provided that the foster child was placed in the care of the disponer prior to that date.

Group A also applies to parents who take an inheritance from their child but only where the parent takes full and complete ownership of the inheritance. If a parent doesn’t have full and complete ownership of the benefit, or if a parent receives a gift, Group B will apply.

Applies where the beneficiary is a:

Parent (however if a parent inherits from their child with full and complete ownership of the inheritance then it’s exempt from tax if in the previous 5 years, the child took an inheritance or gift from either parent that wasn’t exempt from Capital Acquisitions Tax. In this case, no tax needs to be paid even if the inheritance from the child is over the threshold).

Grandparent, grandchild or great-grandchild (If a grandchild is a minor (under 18 years of age) and takes a gift or inheritance from his or her grandparent Group A may apply if the grandchild's parent is deceased).

Brother or sister, and nephew or niece of the giver (Group A may apply if the nephew or niece has worked in the business of the person giving the benefit for the previous 5 years and meets the following criteria:

-The nephew or niece is a blood relation rather than a nephew or niece-in-law

-The gift or inheritance consists of property used in connection with the business, including farming, or of shares in the company.

-If the gift or inheritance consists of property then the nephew or niece must work more than 24 hours a week for the disponer at a place where the business is carried on, or for the company if the gift or inheritance is shares. However if  business is carried on exclusively by the disponer, their spouse and the nephew or niece then the requirement is that the nephew or niece work more than 15 hours a week.

The relief doesn’t apply if the benefit is taken under a discretionary trust.

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 in the same group as your spouse or civil partner would have been if they were receiving a benefit from their relation.

For example, if you get a benefit from the father of your spouse/civil partner, the group threshold would be Group C.

However, if you receive a benefit from the father of your spouse/civil partner and your spouse/civil partner is deceased, then the group threshold would be the same as for a child receiving a benefit from a parent, Group A.

The valuation is the day that 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.

● Date the inheritance can be set aside for or given to the beneficiary

● Date it’s actually retained for the benefit of the beneficiary

● Date it’s transferred or paid over to the beneficiary

● Gift made in contemplation of death (Donatio Mortis Causa)

● Where a power of revocation hasn’t been exercised-This could happen if a person makes a gift of property but reserves the power to 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.

A gift acquires its market value at the time you become entitled to it. The value that’s taxable is then the market value after following deductions:

• Any liabilities
• Costs and expenses that are properly payable
• Including debts due to the inheritance or gift-for example, funeral expenses, costs of administering the estate or debts owed by the deceased
• Stamp duty, legal costs.

If you make a payment for the benefit or some other contribution in return for it, this may be deducted and is known as a 'consideration' and could be a part payment or payment of debts of the donor.

If you don’t get full ownership but instead receive a benefit for a limited period, then a number of factors are taken into account to calculate the value.

Capital Acquisitions Tax is charged at 33% on gifts or inheritances made on or after 6 December 2012 (the rate was formerly 30%).

This only applies to amounts of capital gain over the group threshold.

If you receive a gift or inherit a house that was your main residence, it may be exempt from tax if you don’t own or have an interest in another house however there are conditions on how long you should be resident before and after receiving the benefit.

If a parent receives inheritance from his/her child and takes complete ownership of the inheritance, it’s usually taxable under Group A. However it’s exempt if in the previous 5 years, the child took an inheritance or gift from either parent and it was not exempt from Capital Acquisitions Tax.

Other exemptions relate to certain Irish Government securities, bankruptcy, heritage property, and support of a child or spouse.

If you're confused about Capital Acquisitions Tax you can email us at info@taxback.com or live chat with one of our friendly advisors here.