Subsidising Children and Tax implications

[greeneman]

We ( spouse and I ) have given about 10K per annum to our children for 6 years. It was to pay rent in university. But living costs too.
Once they got jobs they paid their own way.
Its not recorded anywhere but was usually paid by bank transfer or REV.


The gift threshold is 6K per annum per child. ( 3K from each parent)

Are they in the clear with Revenue. ?

Its up to the child to declare the income. I know they have not done it.
I wonder how many actually do declare college subsidies from parents.

 

[Protocol]

Exemption for support, maintenance and education payments

Income or gains that are exempt from CAT

www.revenue.ie

Certain gifts of money, or money's worth, taken for support, maintenance or education, are exempt from Capital Acquisitions Tax (CAT). The exemption applies where the gift is taken during the lifetime of the disponer by:

• a child of the disponer, or the civil partner of the disponer, who is:
  • under 18 years of age
  • aged between 18 and 25 years of age and in full time education
  • or
  • unable to maintain themselves due to a permanent physical or mental disability (there is no age limit on this condition).
• or
• a person to whom the disponer stands in loco parentis (in place of a parent).

The exemption also applies to gifts for support and maintenance to a dependant relative of the disponer, or the disponer’s spouse or civil partner. The gift must be taken during the lifetime of the disponer. Gifts for support, maintenance or education must be:

• part of the normal expenditure for a person in the circumstances of the disponer
• and
• reasonable in relation to the financial circumstances of the disponer.

 

[Protocol]

Its up to the child to declare the income. I know they have not done it.

It is not, as it is not income.

I wonder how many actually do declare college subsidies from parents.

Nobody, as there is no requirement to do so.

 

[patfert1]

Certain gifts of money, or money's worth, taken for support, maintenance or education, are exempt from Capital Acquisitions Tax (CAT).

The document linked on that page https://www.revenue.ie/en/gains-gifts-and-inheritance/documents/cat-treatment-receipts-children.pdf does not define "support, maintenance or education", but section 2.5 writes

...implies at least some level of financial dependence on the part of the child. Revenue does not accept that gifts to a child who is financially independent can come within the terms of the exemption.

Even when a child starts working after education, in many cases nowadays it could be reasonably argued that the child is still financially dependent on the parent. For example, they have a poor salary but high rent and living costs - and the parent still needs to help out.

If I help my kids out with an amount over 3000/year when they start working after university, on the basis they are not able to support themselves from their income, would that be accepted as exempt? One challenge is that the issue of taxation won't actually arise until much later in life when they exceed the lifetime gift from parent limit and Revenue decide to audit them going back a couple of decades.

 

[jpd]

It is not, as it is not income.

Of course it is income

 

[Protocol]

Income is earned from supplying the four factors of production:

labour - wages
land - rent
capital - interest
enterprise - profits


If my parents give me €100 per week during college, that is a gift, it is not income.