Capital Acquisitions Tax (CAT) - Form IT38

If you receive a gift or an inheritance following a bereavement, you may have to pay tax on it. This is known as Capital Acquisitions Tax (CAT). CAT is a tax charged at 33% on the taxable value of a gift or inheritance.

You’ll be required to file a CAT Form IT38 if the total value of gifts/inheritances you receive within any one group is in excess of 80% of the relevant tax-free group threshold. (Form IT38 should be filed in case the individual is not obliged to file Tax return Form 11/Form 12).

The first page of Form IT38:

Tax on all gifts and inheritances with a valuation date in the 12-month period ending 31 August must be paid and filed by 31 October.

Different tax-free thresholds apply depending on the relationship between the disposer (the person giving the benefit) and the beneficiary (the person receiving the benefit). There are also a number of exemptions and reliefs that depend on the type of gift or inheritance.

For example, if you get a gift or inheritance from your spouse or civil partner, you’re exempt from Capital Acquisitions Tax.

Group thresholds

Group A – threshold €400,000

This applies when the beneficiary of the gift or inheritance is a child of the person giving it. This includes a stepchild, an adopted child or a foster child in certain circumstances.

Group A also applies to parents who take full and complete ownership of an inheritance from their child. This will be exempt from tax if, in the previous five years, the child took an inheritance or gift from either parent and it was not exempt from Capital Acquisitions Tax.

If a grandchild is under 18 years of age and takes a gift or inheritance from their grandparent, Group A may apply if the grandchild's parent is deceased.

Group A may apply to a nephew or niece if they worked in the business of the person giving the benefit for the previous 5 years (the so-called ‘Favourite Nephew or Niece Relief’) and:

• are a blood relation
• the gift or inheritance consists of property used in connection with the business, including farming, or shares in the company
• if the gift or inheritance consists of property then the nephew or niece must work more than 24 hours pw for the disposer at a place where the business is carried on, or for the company if the gift or inheritance is shares. If the business is carried on exclusively by the disposer, their spouse and the nephew or niece then the requirement is that the nephew or niece work more than 15 hours a week
• the Favourite Nephew or Niece Relief doesn’t apply if the benefit is taken under a discretionary trust

Group B – threshold €40,000

This group applies to:

• Parent (who doesn’t take full and complete ownership of an inheritance)
• Grandparent
• Grandchild or great-grandchild (aside from the example in Group A)
• Brother or sister
• Nephew or niece of the giver

Group C – threshold €20,000

This applies to any relationship not included in Group A or Group B.

To file a Form IT38 you’ll need:

• all basic personal information about the people giving and receiving the gift or inheritance
• details of the gift or inheritance
• details of any previous inheritances received on or after 5 December 1991
• any other particulars relevant to the assessment of tax
• and all relevant dates