Key Post A Summary of Capital Acquisitions Tax

[Joe_90]

Capital Acquisitions Tax (CAT) arises on the receipt of a gift or inheritance.

The exposure to CAT is determined by the relationship between the donor and the donee.
There are 3 Classes:
Class A: Parents to children
Class B: Other blood relatives, brothers, sisters, aunts, uncles, grandparents, grandchildren, parents.
Class C: Anyone not falling into the above.

Gifts from each Class are treated differently for the purposes of CAT so a different threshold applies so gifts during your lifetime are added together and then subjected to the Threshold.



The threshold applies from the date of the gift or the date of death. In other words, if your father died on 1 June 2016, but you did not get the inheritance until 2017, the old threshold of €280,000 applies.

The biggest difference between gifts and inheritances is that an annual small gift exemption of €3,000 can be deducted from the total gifts received from each individual each year.

Any excess over the threshold are subject to 33%.

In order to establish how much Tax is due the amount of the gift/inheritance has to be established. With a gift the valuation is straight forward as the benefit is taken on the date of the gift and at the market value at that date.

 

[Joe_90]

Revenue's terminology is extremely confusing and leads to many people making incorrect returns.

The date of an inheritance = The date of death (This determines the CAT rate and the CAT thresholds which apply)

The Valuation date is

• the date on which the inheritance is valued for CAT purposes
• and the date when the CAT return has to be filed
• and therefore when the tax has to be paid.

Depending on the particular circumstances, the valuation date may be either
- The date of death
- The date of the grant of probate
- The date of sale (Where an asset is to be sold and the proceeds distributed, or
- The date the asset is transferred to the beneficiary

In the majority of cases the executor has to apply for a grant of probate and can't transfer assets to the beneficiaries before the grant of probate. It takes a few months post death to start the process and then a number of months after the grant has been applied for before it is granted.

So for a date of death of 25 June 2016 the date of the grant of probate could be 25 June 2017. And when then is the valuation date?

There are a number of cases where the valuation date will not be the date of the grant of probate but is the date of death:
- Where the property is held in joint ownership and the survivor inherits on the death of the co owner.
- Where the property that is inherited is being occupied by the beneficiary.


A return and payment will be due where the valuation date is in the 12 months ended 31 August by the following 31 October. So in some cases it could be 14 months or in other cases only two months.

 

[Joe_90]

Frequently Asked Questions

Joe - I have left this blank so that you can fill it in based on the questions you get asked.

brendan

 

[Brendan Burgess]

Revenue's language and guidance in this area is very, very confusing.

The date on an inheritance is the date which determines the CAT rates and the group threshold which applies.

But the "date of an inheritance" is the date of death - and not the date you receive the inheritance. Nor is it the date of valuation.

Brendan