Capital Acquisitions Tax (CAT) is comprised of Gift Tax, Inheritance Tax and Discretionary Trust Tax. The tax is charged on the taxable values of the gift or inheritance.
For the purpose of Gift and Inheritance Tax, the relationship between the person who provided the gift or inheritance (“the disponer”) and the person who received the gift or inheritance (“the beneficiary”), determines the maximum tax free threshold – known as the “group threshold”.
A beneficiary has three group thresholds. Each threshold relates to the relationship between the disponer and the beneficiary. The thresholds since 10 October 2018 are: –
Relationship to Disponer
Group A: Son/ Daughter
Group B: Parent*/ Brother/ Sister/ Niece/ Nephew/ Grandchild
Group C: All other relationships not covered above
* In certain circumstances, a parent taking an inheritance from a child can qualify for a Group (A) threshold
The thresholds are cumulative (as opposed to gift by gift or inheritance by inheritance) for all gifts or inheritances within the particular class taken since 5th December 1991.
When total gifts or inheritances to a beneficiary exceed the relevant tax free threshold, tax at a rate of 33% applies on balance of the gift or inheritance.
A number of exemptions and reliefs can be used to minimise CAT including:
- Spouse to Spouse and Civil Partner to Civil Partner exemption
- Surviving Spouse Relief
- Small Gift Tax exemption of €3,000
- Agricultural Relief
- Business Relief
- Dwelling House Relief
- Child to parent Relief and Exemption
- Favourite Niece/ Nephew relief
- Specialised tax advice may be needed
Taxation is often a major factor in this type of case and needs to be dealt with promptly to avoid interest, surcharges and penalties.