Key Post CAT and CGT on the inheritance of a house - valuation, dates etc.

Brendan Burgess

Brendan Burgess

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This is a very tentative post. Don't quote it until it has been corrected or confirmed.


I have never been able to get a clear answer on this and I can't find it explained clearly anywhere. So I am going to set out my understanding of it so that people can correct it.

I am trying to keep it simple to set out the general principles which apply in the vast majority of cases where a house which is not occupied by the beneficiary is inherited. When the general principles are established, it will be possible to move on to the more complex cases.

Uncle dies on 1 January 2017
Leaves his entire estate which is comprised solely of his family home to his nephew.

The valuation on the date of death was €232,500

Probate was granted on 1 January 2018 - valuation on the date of probate €262,500

The Executor sold the property on 30 June 2019 for €332,500

Clearest article I have found so far: [broken link removed]
 
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CAT calculation

The valuation date for the CAT liability is the date of the Grant of Probate as the nephew was not living in the house.

The date for the CAT threshold is the date of death : 1 January 2017 for Group B was €32,500

Valuation at date of probate : €262,500
Group B threshold: €32,500 (The nephew has received no other gifts in this Group)
Taxable: €230,000

CAT payable : €75,900 (33% of €230,000)

How to pay it
The CAT year runs from 1 September to 31 August
The CAT must be paid and filed by the following 31 October
The Grant of Probate was 1 January 2018
So the beneficiary must pay it and file a return by 31 October 2018 - even if the property has not been sold!



Note: The small gift exemption of €3,000 does not apply to inheritances.
 
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CGT calculation for the Executor

The CGT is calculated on the difference between the sales proceeds and the value as of the date of death.

Proceeds of sale: €332,500
Less value at date of death: €232,500
Capital Gain: €100,000
CGT: €33,000 ( 33% of €100,000)



The Executor pays this over to Revenue.

Final Account for the Executor
Proceeds of sale: €332,500
Less CGT: €33,000
Net proceeds paid to nephew: €299,500

Note: The nephew pays CAT on the Probate Value and not on the actual amount received which is higher.
 
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Alternative approach to CGT

The Executor can transfer the property over to the nephew.

For CGT purposes, the nephew is deemed to have acquired it at the value at the date of death of €232,500

When he subsequently sells it, he will pay CGT on the difference between the sales proceeds and €232,500. (?)

If the nephew lives in the house it will become his PPR and so there will not be a CGT liability when he sells it.
 
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My questions

1) Am I right in saying that CAT is payable on the probate value and not the actual net proceeds of the estate?
2) When is the CAT due?
3) When is the CGT payable by the Executor?
 
OK, it's more complicated that I thought.

[broken link removed]

The valuation Date is the earliest of
- the date the executor can receive the inheritance and give it to you
-the date the executor actually receives the inheritance
- the date the executor gives the inheritance to you

I don't know what that means.
Is it the date of sale?
 
Brendan Burgess said:
CAT calculation

The valuation date for the CAT liability is the date of the Grant of Probate as the nephew was not living in the house.

The date for the CAT threshold is the date of death : 1 January 2017 for Group B was €32,500

Valuation at date of probate : €262,500
Group B threshold: €32,500 (The nephew has received no other gifts in this Group)
Taxable: €230,000

CAT payable : €75,900 (33% of €230,000)

How to pay it
The CAT year runs from 1 September to 31 August
The CAT must be paid and filed by the following 31 October
The Grant of Probate was 1 January 2018
So the beneficiary must pay it and file a return by 31 October 2018 - even if the property has not been sold!



Note: The small gift exemption of €3,000 does not apply to inheritances.
Click to expand...
Hi Brendan. If the beneficiary inherits the net proceeds of sale then surely CAT is based on the cash value of the inheritance. It matters not what the property value was along the way..?
 
Brendan Burgess said:
Alternative approach to CGT

The Executor can transfer the property over to the nephew.

For CGT purposes, the nephew is deemed to have acquired it at the value at the date of death of €232,500

When he subsequently sells it, he will pay CGT on the difference between the sales proceeds and €232,500. (?)

If the nephew lives in the house it will become his PPR and so there will not be a CGT liability when he sells it.
Click to expand...
IMO - Correct
 
Please delete this post if it is unhelpful.

When I inherited shares, I ended up paying tax on a value higher than they were than when I actually got them - I believe the valuation was based on date of death, and that was what my CGT was based on.

When I took ownership of the shares they were were considerably less than value at date of death.

When I sold them, as soon as I could after taking ownership, they were worth less again.

I now have a CGT loss that I carry forward for whenever I might need it.

2 Questions: Could that CGT loss be used to offset any CGT due to a future inheritance?

What happes if Inheritcance Threshold goes up between inheritances?
Say I inherit 310k from Mother, Parent threshold was 200k at the time, I pay CGT on 110k.
Few years later the Parent Threshold increases to 400k. I inherit 320k from Father.
Is the first 200k from Father exempt from CGT, based on the new threshold being 200k higher than it was?
Or do I pay CGT on all the 320k, having maxed out Parent threshold at the time.
 
You are confounding CAT and CGT - they are two completely separate taxes

CAT: Capital Acquisition Tax - paid on gifts and inheritances based on the value on date of acquisition/valuation

CGT: Capital Gains Tax - paid on any gain made by the disposal of an asset, any losses can be carried forward to offset future Capital Gains

CAT is calculated on the cumulative value of the inheritance/gift and is taxed using the threshold at the time of the inheritance/gift

I think the tax due is calculated as follows - but I could be wrong:-

First inheritance: value 310K, Threshold 200K - tax paid on 310-200=110 @ 33% = 36.3K

Second inheritance: value 320K - cumulative inheritance 320+310=630K Threshold 400k tax due on 630-400=230 @ 33% = 75.9k less tax already paid 36.3k so tax now due 75.9-36.3=39.6
 
jpd said:
You are confounding CAT and CGT - they are two completely separate taxes

CAT: Capital Acquisition Tax - paid on gifts and inheritances based on the value on date of acquisition/valuation

CGT: Capital Gains Tax - paid on any gain made by the disposal of an asset, any losses can be carried forward to offset future Capital Gains

CAT is calculated on the cumulative value of the inheritance/gift and is taxed using the threshold at the time of the inheritance/gift

I think the tax due is calculated as follows - but I could be wrong:-

First inheritance: value 310K, Threshold 200K - tax paid on 310-200=110 @ 33% = 36.3K

Second inheritance: value 320K - cumulative inheritance 320+310=630K Threshold 400k tax due on 630-400=230 @ 33% = 75.9k less tax already paid 36.3k so tax now due 75.9-36.3=39.6
Click to expand...
Thanks for the reply, sorry was really thick mixing up CGT and CAT.
 
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