Considering passing on a Dwelling House through a gift or inheritance? If yes, check if the beneficiary will be liable to pay Capital Acquisitions Tax.
What is Capital Acquisitions Tax?
Capital Acquisitions Tax is a tax charged on taxable gifts or taxable inheritances.
What is the difference between a Gift and an Inheritance?
An inheritance is a benefit taken on a death and a gift is a benefit taken other than on a death.
On what amount is Capital Acquisitions Tax charged?
Capital Acquisitions Tax is charged on the taxable value of the gift or inheritance. The taxable value is calculated based on the market value of the gift/inheritance less any debts, costs or consideration that may be paid by the beneficiary.
What is the current rate of Capital Acquisitions Tax?
The current rate is 33%.
What value of Gifts or Inheritances can I receive before Capital Acquisitions Tax will apply?
The amount that can be received by a beneficiary before Capital Acquisitions Tax will apply depends on the relationship between the person providing the Gift or Inheritance and the person receiving the Gift or Inheritance. This relationship will determine the maximum tax free threshold and is known as the ‘Group Threshold’.
The Group Thresholds are lifetime limits and are currently as follows:
Relationship to Disponer
Amount that can be received before tax is payable
Child/Foster Child/Minor Child of a Deceased child
Lineal ancestor or lineal descendant:
Brother, Sister, Niece, Nephew
Relationship other than Group A or B
My parents intend on leaving me the family home in their will. Will I have to pay Capital Acquisitions Tax when I inherit this or are there any reliefs that I can claim?
Depending on the circumstances, you may not have to pay Capital Acquisitions Tax as you may be entitled to claim the Dwelling House Exemption.
With effect from 1 December 1999, Capital Acquisitions Tax may no longer apply on the transfer of a dwelling house through a gift or inheritance, provided certain conditions are met. The principal ones are as follows:
1. The residential property must be the principal private residence of the beneficiary.2. The beneficiary must have been living in the home for the three years prior to the transfer.3. The beneficiary must not have an interest in any other residential property.4. The beneficiary must continue to occupy the house as their main residence for a period of six years commencing on the date of the gift/inheritance. This Condition does not apply where the beneficiary is at least 55 years old at the date of the gift/inheritance.
Are there any circumstances in which the relief can be withdrawn?
Yes. The relief can be withdrawn if the beneficiary:
Are there any exceptions to the conditions above?
Yes. The relief will not be withdrawn if the beneficiary:
If I receive a Gift or Inheritance, do I have to file a tax return?
Yes. Capital Acquisitions Tax is a self-assessed tax and an individual is required to file a Capital Acquisitions Tax return where the total aggregate value of Gifts/Inheritances received on or after the 5 December 1991 is in excess of 80% of the relevant tax free group threshold.
The deadline for filing a CAT return depends on the valuation date of the gift or inheritance received.
What will happen if I do not file a CAT return?
Failing to file a tax return on time upon the receipt of a gift or inheritance could result in Revenue imposing Interest, Penalties and Surcharges.
The above information should be treated as a guide only. As each individual’s circumstances and their entitlements may differ, please ensure that you obtain professional advice before you make any decisions regarding the above.
Author: Rory Coll, FCA specialises in Personal tax at Coll & Co Chartered Accountants, Barna. Galway. He can be contacted by phone: 091-592080 or by email: firstname.lastname@example.org
Coll & Co Chartered Accountants, provide independent Financial, Taxation including Pensions and Estate planning services for private clients. Coll&Co;, Chartered Accountants is regulated by the Institute of Chartered Accountants to provide Investment Advice.