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Capital Acquisitions Tax

Introduction

If you receive a gift, you may have to pay Gift Tax on it. If you receive an inheritance following a death, it may be liable to Inheritance Tax. Both these taxes are types of Capital Acquisitions Tax.

The benefit (the gift or inheritance) is taxed if its value is over a certain limit or threshold. Different tax-free thresholds apply depending on the relationship between the disponer (the person giving the benefit) and the beneficiary (the person receiving the benefit). There are also a number of exemptions and reliefs that depend on the type of the gift or inheritance.

If you receive a gift or inheritance from your spouse or civil partner, you are exempt from Capital Acquisitions Tax.

The tax applies to all property that is located in Ireland. It also applies where the property is not located in Ireland but either the person giving the benefit or the person receiving it are resident or ordinarily resident in Ireland for tax purposes.

Group thresholds

Gifts and inheritances can be received tax-free up to a certain amount. The tax-free amount, or threshold, varies depending on your relationship to the person giving the benefit. There are three different categories or groups. Each has a threshold that applies to the total benefits you have received in that category since 5 December 1991.

Group A applies where the beneficiary, the person receiving the benefit, is a child of the person giving it. This includes a stepchild or an adopted child.

It can also include a foster child if the foster child resided with and was under the care of the disponer and they provided the care, at their expense, for a period or periods totalling at least 5 years before the foster child reached the age of 18. This minimum period does not apply in the case of an inheritance taken on the date of death of the disponer. In this case the Group A threshold will apply provided that the foster child had been placed in the care of the disponer prior to that date.

Group A also applies to parents who take an inheritance from their child but only where the parent takes full and complete ownership of the inheritance. If a parent receives an inheritance where he or she does not have full and complete ownership of the benefit, or if a parent receives a gift, then Group B applies.

If a parent inherits from their child, and have full and complete ownership of the inheritance it is exempt from tax if, in the previous five years, the child took an inheritance or gift from either parent and it was not exempt from Capital Acquisitions Tax. In this case, no tax needs to be paid even if the inheritance from the child is over the threshold.

Group B applies where the beneficiary is the:

  • Parent - see also Group A above
  • Grandparent
  • Grandchild or great-grandchild - see below
  • Brother or sister
  • Nephew or niece of the giver - see below

If a grandchild is a minor (under 18 years of age) and takes a gift or inheritance from his or her grandparent Group A may apply if the grandchild's parent is deceased.

Group A may apply to a nephew or niece if he or she has worked in the business of the person giving the benefit for the previous five years and meets the following criteria:

  • The nephew or niece must be a blood relation rather than a nephew or niece-in-law
  • The gift or inheritance consists of property used in connection with the business, including farming, or of shares in the company.
  • If the gift or inheritance consists of property then the nephew or niece must work more than 24 hours a week for the disponer at a place where the business is carried on, or for the company if the gift or inheritance is shares. But if the business is carried on exclusively by the disponer, their spouse and the nephew or niece then the requirement is that the nephew or niece work more than 15 hours a week.
  • The relief does not apply if the benefit is taken under a discretionary trust.

Group C applies to any relationship not included in Group A or Group B.

If you receive a benefit from a relation of your deceased spouse or civil partner, you can be assessed with the same group as your spouse or civil partner would be if they were receiving the benefit from their relation. For example, if you receive a benefit from the father of your spouse or civil partner, the group threshold would be Group C. But if you receive a benefit from the father of your spouse or civil partner and your spouse or civil partner is deceased, then the group threshold that applies to you would be the same as for a child receiving a benefit from a parent, Group A.

CAT thresholds

2009 (up to 7 April 2009)

2009 (on or after 8 April 2009)

2010 (up to 7 December 2010)

2010 (on or after 8 December 2010) and 2011

 2011 (on or after 7 December 2011) and 2012
Group A €542,544 €434,000 €414,799 €332,084 €250,000
Group B €54,254 €43,400 €41,481 €33,208 €33,500
Group C €27,127 €21,700 €20,740 €16,604 €16,750

Valuation

The valuation date is the date on which the market value of the property comprising the gift/inheritance is established.

In the case of a gift, the valuation date is normally the date of the gift.

In the case of an inheritance, the valuation date is normally the earliest of the following dates:

  • The date the inheritance can be set aside for or given to the beneficiary
  • The date it is actually retained for the benefit of the beneficiary
  • The date it is transferred or paid over to the beneficiary

The valuation date will normally be the date of death in the following circumstances:

  • Gift made in contemplation of death (Donatio Mortis Causa)
  • Where a power of revocation has not been exercised. This could arise where a person makes a gift of property but reserves the power to revoke, or take back, the gift. If he or she dies and this power ceases, the recipient then becomes taxable as inheriting the benefit. If the beneficiary had free use of the benefit before this, he or she will be taxed as receiving a gift of the value of the use of the property.

Taxable value

The gift or inheritance is valued as the market value at the time you become entitled to the use or benefit of it.

The value that is taxable is the market value minus the following deductions.

You can deduct 'any liabilities, costs and expenses that are properly payable'. This would include debts that must, by law, be paid and that are payable out of the benefit or because of it. With an inheritance, these may be funeral expenses, the costs of administering the estate, or debts owed by the deceased. For a gift, they could include legal costs or stamp duty.

If you make a payment for the benefit or some other contribution in return for it, this may also be deducted. This is known as a 'consideration' and could be, for example, a part payment, an amount paid annually to the donor or other person, or a payment of debts of the donor.

If you do not receive full ownership but instead receive a benefit for a limited period, then a number of factors are taken into account to calculate the value. The calculation of the value of a limited interest is explained in Revenue Guide IT 39 (pdf) (Appendix 7).

Tax rate

Capital Acquisitions Tax is charged at 30% in respect of gifts or inheritances made on or after 7 December 2011 (the rate was formerly 25%). This only applies to amounts over the group threshold. For example, if you have received gifts from your parents with a taxable value of €550,000, you only pay tax on the amount over the appropriate group threshold (Group A threshold: €250,000). So €300,000 is taxed at 30%.

Exemptions

The following are exempt from Capital Acquisitions Tax:

The first €3,000 of the total value of all gifts received from one person in any calendar year is exempt. This does not apply to inheritances.

If you receive a gift or inheritance of a house that has been your main residence, it may be exempt from tax if you do not own or have an interest in any other house. There are conditions on how long you must be resident in the house before and after receiving the benefit. More information is available on this website - see Dwelling-house exemption below - or Revenue's leaflet CAT 10.

If a parent receives an inheritance from his/her child, and takes full and complete ownership of the inheritance, it usually taxable under Group A. But it is exempt if, in the previous five years, the child took an inheritance or gift from either parent and it was not exempt from Capital Acquisitions Tax.

Other exemptions relate to certain Irish Government securities, bankruptcy, heritage property, and support of a child or spouse.

Further information on the above reliefs and exemptions is contained in Revenue guide IT 39 (Appendix 6).

Reliefs

Business Relief
Tax relief applies to gifts and inheritances of business property and reduces the taxable value of the property by 90%. More information on business relief can be found in Revenue leaflet CAT 4.

Agricultural Relief
Tax relief applies to gifts and inheritances of agricultural property and reduces the market value of the property by 90% for the purposes of Capital Acquisitions Tax. More information on agricultural relief can be found in Revenue leaflet CAT 5.

Making a return and paying Capital Acquisitions Tax

If you have received a gift or inheritance then you are responsible for paying any Capital Acquisitions Tax that is due. If you are not resident in Ireland, you must get an agent who is resident in Ireland, such as a solicitor, to take responsibility for the payment of CAT.

You must make a tax return if the total value of gifts and inheritances you have received in one of the groups, A, B or C, since 5 December 1991 is more than 80% of the tax-free threshold for that group.

For example, if you received a gift of €20,000 from a brother and then an inheritance of €10,000 from a grandparent, both of these benefits would come under Group B and amount to a total of €30,000. The threshold for Group B in 2012 is €33,500 and 80% of this is €26,800. Because the benefits in group B exceed 80% of the tax-free threshold, you are required to make a tax return even though the total amount received is below the threshold.

Gifts or inheritances with a valuation date before 14 June 2010

You must complete the tax return and pay the tax within 4 months of the valuation date. You do this by completing Form IT 38 (pdf). Revenue provide A Guide to completing the Self Assessment Return (Form IT 38). If the tax is not paid within 4 months, interest is charged.

Gifts or inheritances with a valuation date on or after 14 June 2010

Gifts or inheritances with a valuation date on or after 14 June 2010 have a new fixed CAT pay and file date. All gifts and inheritances with a valuation date in the 12-month period ending on the 31 August must be paid and filed by 31 October (this date was amended from 30 September by the Finance Act 2013).

This means, if the valuation date is between 1 January and 31 August, you must complete the tax return and pay the tax on or before 31 October in that year. If the valuation date is between 1 September and 31 December you must complete the tax return and pay the tax on or before 31 October in the following year.

For example

If your inheritance has a valuation date of 21 February 2012, you must complete the tax return and pay the tax on or before 31 October 2012.

If your inheritance has a valuation date of 6 November 2012, you must complete the tax return and pay the tax on or before31 October 2013.

There is a surcharge for late pay and file of CAT. The surcharge is based on a percentage of the total tax payable for the year the return is late and graded according to the length of the delay. However, there is an overall cap on the level of the surcharge which is calculated as follows:

  • 5% surcharge to a maximum of €12,695, if you complete the tax return and pay the tax within 2 months of the pay and file date.
  • 10% surcharge up to a maximum of €63,485, if you do not complete the tax return and pay the tax within 2 months of the pay and file date.

Gift and inheritance tax returns must be made electronically using Revenue’s Online Service, however there are some exceptions. A new paper gift and inheritance tax return (Form IT38S) will be available but can only be used by you, the taxpayer, if you meet the following criteria:

  • You are not claiming any relief, exemption or credit, apart from small gift exemption.
  • The benefit taken is an absolute interest without conditions or restrictions.
  • The property included in the return was taken from only one disponer and is not part of a larger benefit.

Special circumstances

In certain circumstances, it is possible to pay the tax by instalments over a period not exceeding 60 months. This applies to any property where the beneficiary does not have full and complete ownership.

It also applies if the benefit is full and complete ownership of the following:

  • Property which cannot be moved (for example, lands or a house) or
  • Property which can be moved and is agricultural or business property

Revenue can consider allowing a postponement of tax due if there is hardship involved.

Contact

Revenue

CAT National Taxpayer Information Unit
 Ist Floor
CRIO
Cathedral Street
Dublin 1
Ireland

Tel:(01) 865 5000
Locall:1890 201 104
Homepage: http://www.revenue.ie
Email: catdr@revenue.ie

Further information

Exemptions

The following items are exempt from Capital Acquisitions Tax:

  • Gifts or inheritances from a spouse or civil partner
  • Payments for damages or compensation
  • Benefits used only for the medical expenses of a person who is permanently incapacitated due to physical or mental illness
  • Benefits taken for charitable purposes or received from a charity
  • Winnings from a lottery, sweepstake, game, or betting
  • Reasonable support for the maintenance or education of a child or spouse/civil partner.

Houses, gardens or objects that are of national, scientific, historic or artistic merit and meet certain conditions (see 'Heritage Property Relief' below).

Pension and redundancy payments are not usually liable to Gift Tax. If the employee however is a relative of the employer, or the employer is a private company and the employee is deemed to control the company, Revenue may disallow this exemption if they consider the payment excessive.

The first €3,000 of the total value of all gifts received from one person in any calendar year is exempt. This does not apply to inheritances.

If a parent receives an inheritance (with full and complete ownership), from a child, it is exempt from tax if the child had taken an inheritance or gift from either parent in the previous five years and that inheritance or gift was not exempt from Capital Acquisitions Tax.

Payments that reduce the debt of a bankrupt or near-bankrupt are usually exempt (Section 82, Capital Acquisitions Tax Consolidation Act 2003).

Other exemptions relate to government securities or unit trusts where the beneficiary is non-resident.

See Appendix 6 of Revenue guide IT 39 (pdf) for further information on the above reliefs and exemptions.

Dwelling-house exemption

A gift or inheritance of a house which has been your main residence may be exempt from Capital Acquisitions Tax if you do not own or have an interest in any other house.

You must have lived in the house as your main residence for the three years immediately preceding the date of the gift or inheritance. However, in the case of gifts taken on or after 20 February 2007, time you lived in the house will not be counted if it was also the disponer's only or main residence, unless, the disponer was dependent on your care because of old age or illness. Also the house must be owned by the disponer for three years if it is a gift taken on or after 20 February 2007.

If the house replaced another house as your main residence in that time, you can still claim the exemption provided that your main residence was in these houses for a total period of three out of the four preceding years. However, in the case of gifts taken on or after 20 February 2007, each house must be owned by the disponer for the relevant part of the 3 year period that it was occupied by you.

You must continue to occupy the house as your main residence for the following six years but this condition does not apply if you are over 55 years at the time of receiving the benefit. If you are away because of an obligation to work abroad you can include this as time resident.

Where the house is replaced by another property as your main residence, the time for which each house is your main residence must total six of the seven years commencing on the date of the gift or inheritance.

If you sell the house and the sale does not meet the conditions outlined above then the relief will be withdrawn. An exception to this is if the property is sold because you need long-term care in a hospital or nursing home.

If you sell the house within six years and the value of a replacement property is less than the value of the original property then there will be a clawback of the difference. For example, if the original relief was for a property worth €600,000 and you sell this to buy a property worth €400,000, you will only be allowed relief on the €400,000 and there will be a clawback on the €200,000 difference. You will need to complete a revised form IT 38 and pay the additional tax within four months.

Agricultural Relief

Gifts and inheritances of agricultural property can qualify for relief that reduces the market value of the property by 90% for the purposes of Capital Acquisitions Tax.

To qualify for Agricultural Relief the beneficiary must be a farmer. This means that taking the gift or inheritance into account, agricultural property must account for at least 80% of the gross market value of your assets on valuation date. This restriction does not apply if the gift or inheritance is trees or underwood.

If your principal residence is not situated on the farm it does not qualify as agricultural property. However borrowings on such a residence can be offset against its value. This may reduce the value of assets that are non-agricultural, increasing the proportion of agricultural assets for the 80% rule.

The relief will be withdrawn:

  • If the beneficiary is not resident for all of the three tax years following the tax year in which the valuation date falls.
  • If the property is sold within six years and not replaced by another agricultural property with one year
  • If the property is compulsorily purchased within six years and not replaced within six years.

If a beneficiary does not qualify for Agricultural Relief, then agricultural property can qualify for Business Relief.

If Agricultural Relief or Business Relief has been granted on the development value of development land, the relief will be clawed back if the land is disposed of between six to ten years after the date of the gift or inheritance. Development land is land with a value that exceeds the current use value of the land at the date of the gift or inheritance.

In calculating the taxable value of the propery after agricultural relief, only 10% of the value of the allowable deductions are taken into account (that is, the deductions are reduced by 90%, in proportion with the relief).

For more information on Agricultural Relief is available in IT 39 (Appendix 2) or Section 89 of Capital Acquisitions Tax Consolidation Act 2003.

Business Relief

Gifts and inheritances of relevant business property qualify for relief that reduces the taxable value of the property by 90% for the purposes of Capital Acquisitions Tax.

Relevant business property

Relevant business property includes the following.

The business or, for a business carried on by a sole trader or by a partnership, an interest in the business. A "Business" is defined as one which is carried on for gain and it includes the exercise of a profession or vocation as well as a trade. Individual assets used in the business, such as a factory will not qualify for the relief if they are transferred to the beneficiary without the business.

The unquoted shares or securities of a company carrying on a business provided that the company is incorporated and that the shares meet certain requirements specified in section 93 of Capital Acquisitions Tax Consolidation Act 2003 and outlined in IT 39 (Appendix 3).

Any land or buildings, machinery or plant in the State that are owned by the disponer but used wholly or mainly for the purpose of a business carried on by a company controlled by the disponer or by a partnership of which the disponer was a partner. The shares in the company or the partnership interest must be taken by the beneficiary together with the lands, buildings, machinery or plant in order for those assets to qualify for the relief.

Quoted shares or securities of a company if the shares were unquoted before 23 May 1994 or if later, were unquoted at the time the disponer became the beneficial owner. Quoted shares or securites must meet the same requirement specified for unquoted shares in order to qualify for relief.

Exclusions

Businesses are excluded from the relief if they wholly or mainly consist of dealing in currencies, securities, stocks, shares, land or buildings, or making or holding investments

Conditions

The relevant business property must have been in continuous ownership by the disponer for a minimum period of two years in the case of an inheritance which was taken on the death of the disponer or five years in any other case.

This period can include a period of ownership by the disponer's spouse or a trustee. A replacement of a relevant business property can be included in the ownership requirement, in which case the minimum periods are extended to three and six years respectively.

In the case where a beneficiary receives a gift or inheritance that meets the minimum period requirement but they then die before they in turn have owned it for the minimum period, the subsequent inheritor of the benefit can still qualify business relief under the minimun period condition.

For more information on Business Relief see section 92 Capital Acquisitions Tax Consolidation Act 2003.

Heritage Property Relief

Houses and gardens or objects that are of national, scientific, historic or artistic interest are exempt from Capital Acquisitions Tax if they meet certain conditions.

Conditions

Reasonable facilities for viewing must be available to members of the public or, in the case of objects, to recognised bodies or associations.

The property must not be used for trading purposes.

Houses and gardens must have had reasonable facilities available for their viewing by the public for three years before a gift or inheritance.

The property must not be sold within six years unless the sale is to a national institution by private treaty.

The relief can be clawed back if the conditions are not kept.

For more information on Heritage Property Relief see Revenue leaflet CAT 8.

Page updated: 22 May 2012

Language

Gaeilge

Useful Resources

Related Documents

  • Capital Gains Tax following Separation/Divorce in Ireland
    Synopsis of the impact of separation/divorce on capital taxes - capital gains tax, capital acquisitions tax and stamp duty
  • Capital Acquisitions Tax Legislation
    Capital Acquisitions Tax was introduced in the Capital Acquisition Tax Act 1976 and amended in subsequent finance act. The relevant legislation was consolidated in the Capital Acquisitions Tax Consolidation Act 2003.
  • Budget 2011
    Budget 2011 was announced on 7 December 2010. Summary of the main changes.

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