When is CAT due and CGT

[Learner2015]

hi all,

Just looking to clear a few things up re an inheritance.

Scenario is two siblings inherited house and cash from parent on their death in a 50:50 split.

Questions:

1) The parent died in December 2015. What CAT thresholds can the children use, the ones at the time of parent death or the increased amounts from 2016?

2) what date does the clock start ticking for them to pay CAT, is it the valuation date or the date executor transferred house to them and is the date of transfer the same date probate is granted?

3) House was valued at €500k on valuation date now worth €600k. Children not selling house they are going to rent it out. When does the CGT liability become payable?

 

[Joe_90]

1) The parent died in December 2015. What CAT thresholds can the children use, the ones at the time of parent death or the increased amounts from 2016?

It's the date of death.

2) what date does the clock start ticking for them to pay CAT, is it the valuation date or the date executor transferred house to them and is the date of transfer the same date probate is granted?

Unless one party was living in the house the valuation date is the date of the grant of probate. If this is in the 12 months ended 31 August 2107 then the CAT is payble in November 17. The date of transfer is not the valuation date.

3) House was valued at €500k on valuation date now worth €600k. Children not selling house they are going to rent it out. When does the CGT liability become payable?

The CAT is based on the valuation on the valuation date. CGT is payable on the sale of the property so will arise on a future sale.

Joe

 

[Learner2015]

Joe many thanks for that. Clears things up for me.

 

[Vanessa]

Be carefull. You are very likely to have incurred a late payment penalty if this inheritance has not been declared

 

[Julius]

Unless one party was living in the house the valuation date is the date of the grant of probate. If this is in the 12 months ended 31 August 2107 then the CAT is payble in November 17. The date of transfer is not the valuation date.

My father died recently and my brother (joint beneficiary with me) had been caring for him for his last two years following father's stroke. My brother claimed Carers Support Grant for those two years.

1. Does this mean that we cannot use the date of Grant of Probate as the valuation date but instead have to use the Estate Agents valuation at date of death? In a rising house market and given the time it takes to get Probate granted the difference between the two valuations will be significant and hence the potential CGT will be high.
2. If we have to use the EA's valuation at date of death, is there any way we can reduce the CGT e.g. deducting solrs & EA's fees from the CGT charge?

 

[Prosper]

My father died recently and my brother (joint beneficiary with me) had been caring for him for his last two years following father's stroke. My brother claimed Carers Support Grant for those two years.

1. Does this mean that we cannot use the date of Grant of Probate as the valuation date but instead have to use the Estate Agents valuation at date of death? In a rising house market and given the time it takes to get Probate granted the difference between the two valuations will be significant and hence the potential CGT will be high.
2. If we have to use the EA's valuation at date of death, is there any way we can reduce the CGT e.g. deducting solrs & EA's fees from the CGT charge?

Hi Julius - I think Joe_90 was referring to CAT and not CGT. However, I don't know the answer but I also would like to know. If it applies to CGT then that would be great - but I don't think so

 

[Julius]

I found the post below in a thread from April. It appears that there's no way out of the date of death valuation being used for the calculation of CGT. What "dubguy's" post also appears to suggest is that the date of probate valuation is what's used for CAT. This now means that we will be caught for both CGT and CAT because the increase in value of the house from date of death to date of Probate means we have crossed the CAT threshold. However, if we can offset the CGT liability against the CAT liability then no CAT will be due.
So that leaves the question of how to reduce our CGT liability. What expenses can be allowed against the amount subject to CGT?

1. Registered User
   Posts:
   19
   Just to add some results of my research so far. Re date of valuation, it appears that for a house that is being passed to a non occupier or spouse, in a typical "residue of my estate" type will, the date of valuation is indeed the date of grant of probate ([broken link removed]). But this is purely for CAT purposes and appears to be mainly of interest in relation to when CAT is due (as it helps with the situation where a person dies in August and the CAT could be due that Oct). This is confusing though, as my understanding of the CA24 submission is that you need to put down the valuation at date of death (and certainly that is what people usually ask for when they get a probate house valuation, the value at the date of death - right?) Here is a quote from the Revenue guide for the CA24 - Please furnish the gross market value at the date of death of immoveable assets, i.e. houses, apartments, lands etc.
   
   It appears also that CGT is always based on the date of death valuation (which is probably why the CA24 asks for that valuation date).
   
   But that seems to leave in limbo the time between death and grant of probate. If the estate sells the house on the day of GOP, then presumably that becomes an acceptable value for CAT. But any difference between that and the date of death valuation on the CA24 now becomes liable to CGT, payable by the estate. This general concept is discussed here (http://www.ohanlontax.ie/downloads/CGTforEstatesinaRisingPropertyMarket.pdf) but it doesn't get to the point of saying if the CGT paid by the estate can be offset against the CAT paid by the beneficiaries.
   
   It generally looks like the way to approach this is to go Sale Agreed on any properties prior to submission of the CA24 and put that value down - this ensures that any capital gain is attributable to the deceased. That assumes (and it would appear to be a correct assumption) that the revenue isn't going to try and establish a notional value at date of death different from the submitted CA24 Sale Agreed value.
   
   If that isn't done and an estate agent valuation is used on the CA24, then any subsequent sale by the executors would appear to raise a potential CGT liability on the estate, which comes back to my main question - can this be offset against the CAT due by the beneficiaries or is that gain effectively taxed twice.
   
   Apr 3, 2017
   #6 Reply
   
   
2. Registered User
   Posts:
   19
   Last edited: Apr 3, 2017
   OK I think I have it. Generally, the revenue does allow CGT to be offset against CAT arising from the same event. However they don't see the sale of assets during the administration of an estate as being the same event as the CAT on the inheritance. Here is their note (from http://www.revenue.ie/en/tax/cat/guide/credit.html) -
   
   
   Capital Gains Tax arising on the disposal of assets in the course of administration of an estate does not arise on the actual inheritance, which is the event that gives rise to Capital Acquisitions Tax. Therefore, a credit for Capital Gains Tax is not given. The amount of Capital Gains tax paid may however be deducted as a liability in arriving at the taxable value of the inheritance.
   
   That seems pretty definitive then, you do end up getting hit twice for any gains taken during the administration. Actually it is not quite twice as you can deduct the CGT paid from the inheritance, but it is still a fairly substantial hit. So make sure your CA24 value is as close to sales value as possible or if possible pass the whole house over to the beneficiary (in which case they sort out their own CGT if they ever sell it).
   
   Last edited: Apr 3, 2017
   Apr 3, 2017
   #7 Reply
   

 

[Joe_90]

My father died recentlyand my brother (joint beneficiary with me) had been caring for him for his last two years following father's stroke. My brother claimed Carers Support Grant for those two years.

1. Does this mean that we cannot use the date of Grant of Probate as the valuation date but instead have to use the Estate Agents valuation at date of death? In a rising house market and given the time it takes to get Probate granted the difference between the two valuations will be significant and hence the potential CGT will be high.
2. If we have to use the EA's valuation at date of death, is there any way we can reduce the CGT e.g. deducting solrs & EA's fees from the CGT charge?

Sorry for your loss.

There are a number of issues here.

There can be a different valuation date for beneficiaries so it could be the case that it's date of death for one and date of grant for the other.

The CAT is based on the value at the valuation date.

You keep referring to CGT so I'm not sure if you are confusing the Taxes or perhaps there is more that you have not said.

 

[Julius]

There can be a different valuation date for beneficiaries so it could be the case that it's date of death for one and date of grant for the other.

The CAT is based on the value at the valuation date.

So for my brother the valuation date for CAT purposes is the date of Grant of Probate and for me the valuation date for CAT is the date of death.

You keep referring to CGT so I'm not sure if you are confusing the Taxes or perhaps there is more that you have not said.

I understand the difference between CGT and CAT, I just did not read your previous post fully. For CGT purposes the valuation is valuation at date of death that was entered on the CA24 form. The difference between that value and the actual sold price of the house will mean a significant CGT liability. I'd like to know how I can reduce this liability?

 

[Joe_90]

Is the house being sold by the executors before it is transferred to the beneficiaries? In which case it's the estate that is liable not the beneficiaries.

If you are living in the house and then potentially using the date of death as the valuation date then you may qualify for Dwelling house exemption which could reduce the CAT due and you may qualify for PPR relief and have no CGT to pay.

You should seek professional advice specific to your circumstances.

 

[Julius]

Is the house being sold by the executors before it is transferred to the beneficiaries? In which case it's the estate that is liable not the beneficiaries.

Myself and my brother are the executors and the only beneficiaries. We have sale contracts signed on the house and are awaiting the Grant to arrive. Our solicitor wrote to us saying that as neither of us were living in the house at the time our father died then there was no need for us to do a CGT return as there was no liability. However, he forgot that my brother rented his own house out and moved in with my father after father had a stoke when mother died and has since claimed Carers Support Grant (€1.5k x 2 years = €3k carers grant). I think our solicitor was confusing CGT with CAT.

If you are living in the house and then potentially using the date of death as the valuation date then you may qualify for Dwelling house exemption which could reduce the CAT due and you may qualify for PPR relief and have no CGT to pay.

I take it that this exemption might apply for my brother.

When do I need to submit a tax return for deceased father? Also, when do each of us have to submit our IT38S forms to Revenue? Finally, I assume estate can be distributed once we have the Grant of Probate which is imminent.

You should seek professional advice specific to your circumstances

Once he has the Grant of Probate in his possession I will of course take the professional advice of the solicitor.