Capital Acquisitions Tax (CAT) applies to gratuitous benefits, for example, a gift or an inheritance.

The person who provides the property is the disponer, and the disposition is the method by which the property passes. Where property passes by will, the disponer is the testator. Where property passes on intestacy (no will), the disponer is the deceased.

The term disposition is very widely defined to include not only a will or intestacy, but any method (including, for example, any trust covenant, agreement or arrangement) by which property can pass.

The date of the disposition is the date of death of the disponer in the case of property passing by will or intestacy, and in other cases it is the date on which the disponer provided the property (or bound himself to provide it).

Taxable Benefits

To be chargeable, a gift or inheritance must be taxable.

A gift is taxable if:

1. the disponer was Republic of Ireland (ROI) resident or ordinarily resident at the date of the disposition, or at the date of the gift, or
2.  the donee was Republic of Ireland (ROI) resident or ordinarily resident at the date of the gift.

Otherwise, only the part of the property situate in the ROI at the date of the gift is taxable.

An inheritance is taxable if:

1. the disponer was ROI resident or ordinarily resident at the date of the disposition, i.e., the date of death, or
2. the successor was ROI resident or ordinarily resident at the date of the inheritance.

Otherwise, only the part of the property situate in the ROI at the date of the gift is taxable.

Taxable Value

A property’s taxable value is computed as:

Market value less liabilities, costs and expenses payable out of the gift or inheritance = incumbrance free value, less consideration paid by acquirer in money or money’s worth =  taxable value.

Tax is charged on the valuation date. In the case of a gift, this is the date of the gift. In the case of an inheritance, it is generally the date of death, or the earliest date on which his personal representatives can retain the inherited property for the beneficiary.

Inheritance Tax

The rates applicable to gifts and inheritances are:

Threshold amount: Nil

The balance: 33% (since 6 December 2012 to the current date).

Returns

A CAT return must be filed, and the tax paid:

(a) on or before 31st October, If the valuation date falls between 1st January and 31st August in the same year,

(b) on or before 31st October in the following year, if the valuation date falls between 1st September and 31st December in the previous year.

Exemptions Thresholds

Other exemptions

The main exemptions from CAT are:

(a) Spouses’ exemption: Property taken from a spouse is exempt from gift tax and inheritance tax.

(b) Principal private residence.

(c) An inheritance taken from a pre-deceased child.

(d) The first €3,000 of gifts taken in each calendar year.

(e) A gift or inheritance taken for public or charitable purposes.

(f) Objects of national, scientific, historic, or artistic interest, which the public are allowed to view.

(g) Pension lump sums.

(h) Securities acquired by a non-resident non-Irish domiciled beneficiary from a disponer who held them for at least three years.

(i) Personal injury compensation or damages, and lottery winnings.

(j) Property acquired under a self-made disposition.

Reliefs

The main reliefs from CAT are:

(a) A widowed person can “stand in the shoes of” a predeceased spouse.

(b) Agricultural relief. To qualify, the beneficiary must be a “farmer”, i.e., 80% of the gross market value of his assets must consist of agricultural property (i.e., farm land and buildings, crops, trees and underwood, livestock, bloodstock, and farm machinery) located in the EU.

(c) Business relief. To qualify, the property must be relevant business property, i.e., a sole trade business, an interest in a partnership, and unquoted shares in an Irish incorporated company.

(d) Favourite nephew (or niece) relief.

(e) Double taxation in respect of US and UK equivalent taxes.

(f) The proceeds of a life policy taken out to pay.

(g) If the same event gives rise to a liability to both CAT and CGT, the disponer’s CGT can be credited against the recipient’s CAT.

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