Capital Acquisitions Tax

L

Liamos

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A friend of mine has come to me with this query. She has already received a gift from her parents up to the Class A threshold level.

She is now considering buiding an extension to her house and her parents are willing to give her another €100k approx. She would have to pay CAT of 25% on this ie €25K. If she was to classify the €100k as a 'loan' rather than as a gift, would it be possible to avoid the CAT? My understanding is that the 'loan' would never actually be repaid.
 
If a legal document was drawn up stating that it was a loan, how would the Revenue treat the €100K? How long can a loan be outstanding before it is treated as a gift?
 
Presumably the legal document would have a schedule setting out the repayments expected and their frequency. If there is no evidence or intent of repayment then is is not a loan.
 
What is your friend going to do when her parents die and leave her her inheritance - classify that as a loan as well.
 
She's not planning on that happening for a while. Obviously when it does, she will have to pay tax on any inheritance. In the mean time, do you have any helpful suggestions on how a parent can give a child €100K without incurring CAT?
 
Liamos said:
... do you have any helpful suggestions on how a parent can give a child €100K without incurring CAT?
Click to expand...
If you are looking for "helpful suggestions" about how to engage in illegal activities, maybe you need to look elsewhere.

In the circumstances you describe, short of lying to Revenue, engaging in tax evasion by signing a "legal document" that will never be actioned, I think the short answer seems to be a resounding "No".
 
I'm just wondering if there are any tax planning measures that can be used to avoid paying the tax. Tax avoidance measures rather than tax evasion measures. If there are not, then obviously the tax will have to be paid.
 
I think she has used up her threshold. I know her parents sold a pub for a few million and dished out some of the proceeds to their kids. I guess its a nice problem to have!
 
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