Capital Acquisitions Tax aggregation

zag

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Picture this scenario (using round figures for ease of interpretation) -

2001 - person receives gift of €75,000 from parent, below threshold, no tax paid
2009 - person inherits €500,000 from parent, threshold is €542,000, cumulative amount is €575,000, tax paid on €33,000, all good.
2012 - person receives gift of €10,000 from parent, cumulative amount is €585,000, but the threshold is now €225,000, so . . . there's 33% tax payable on €360,000

From my reading of the Revenue documentation this appears to be the case. Someone please tell me it ain't so. Please.

Is there no concept of having paid all due taxes in 2009? I understand why you might want to aggregate all gifts over the years, but does the threshold in force at the time not come into play?

z
 
http://www.revenue.ie/en/tax/cat/aggregation-rules.html


Benefits taken on or after 5th December 2001:

All benefits taken from the same Group Threshold since 5th December 1991 are added together to calculate the tax on the latest benefit.
Calculation in respect of the latest of a series of benefits taken since 1991:

  1. Aggregate all prior benefits within the same group threshold as the current benefit with the current benefit and calculate the tax on the total.
  2. Aggregate all prior benefits within the same group threshold as the current benefits, excluding the current benefit and calculate the tax on the total.
  3. Subtract tax at (2) from tax a (1) - this gives tax referable to the current benefit.
This calculation applies where aggregation applies in relation to same group/class threshold only.
 
Following the instructions above, given the facts as you outlined:

1. Aggregate all prior benefits within the same group threshold as the current benefit with the current benefit (€585,000) and calculate the tax on the total.
Taxable amount €585k - €225k = €360k. Tax @ 33% = €118,800

2. Aggregate all prior benefits within the same group threshold as the current benefits, excluding the current benefit (€575,000) and calculate the tax on the total.
Taxable amount €575k - €225k = €350k. Tax @ 33% = €115,500.

3. Subtract tax at (2) from tax a (1) - this gives tax referable to the current benefit.
€118,800 - €115,500 = €3,300

Put in simple English, if you've already exceeded the relevant threshold, the current gift/inheritance will be taxable in full at the applicable rate - in this case the gift of €10k is taxable at 33%.
 
Phew, many thanks. That's a load off the mind for today.

Cheers,

z
 
We, in our fifties, own an apartment in Dublin, that is probably down in value to about €225,000...Should we transfer ownership to one of our adult kids now, thereby avoiding capital acquisitions tax?..It's a rental property, renting well but it is in negative equity.
 
Should you gift a property in negative equity to your child to avoid tax?

They might accept the property but a loan in excess of the value?
 
We, in our fifties, own an apartment in Dublin, that is probably down in value to about €225,000...Should we transfer ownership to one of our adult kids now, thereby avoiding capital acquisitions tax?..It's a rental property, renting well but it is in negative equity.


As you mention negative equity , I assume there is a mortgage. You can't sell or give away the apartment without the mortgage being cleared.

Only way you can transfer ownership, is if you hand over the cash to cover the negative equity, or get a loan to cover it.

Your son or daughter ( the new owner) will have to apply for a mortgage in their own name, and will only get 92% of the current value of the apartment, assuming that a bank will give them a mortgage for an investment property at all.

It sounds to me like the plan will not work at all, and the cost and hassle would not be worth it to minimize the risk of CAT in the future.
 
Hi. I have a question about CAT. In 2007, my father transferred a property valued at €90k to me. This year he transferred land and property to me valued at €226k. What CAT will I have to pay?
 
prior benefit|90,000
Current benefit|226,000
Cumulative benefit|316,000
less Threshold|-225,000
Taxable benefit|91,000
Tax rate|33%
Tax due|30,030
 
Land may qualify for agricultural relief go and get professional advice, it may save you €30k.
 
Unfortunately the land won't qualify for agricultural relief. I thought that it might not be as high as that after reading what Mandlebrot posted
 
Unfortunately the land won't qualify for agricultural relief. I thought the amount due might not be so high after reading what Mandelbrot posted.
 
can a parent gift 3000 to a son/daughter each year without the reciepient paying tax on it. can the son/daughter receive just one three thousand or can each parent gift them it
 
AFAIK, every single person is classed as a separate donation. Therefore it's €3000 from each person regardless of relation class.
 
Thanks Mercman,
So if I understand you correctly both parents could gift their son 3000 euro in the one year and he would not have to pay any tax on it.
 
That's my take on it. I and my wife have done it between families for years, and my accountants who have been kept fully abreast of the situation have never raised a query.
 
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