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.
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:
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:
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.
|Group A: €310,000||Applies where the beneficiary is a child (including adopted child, step-child and certain foster children) or minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an inheritance of an absolute interest from a child.|
|Group B: €32,500||Applies where the beneficiary is a brother, sister, niece, nephew or lineal ancestor or lineal descendant of the disponer.|
|Group C: €16,250||Applies in all other cases.|
2009 (up to 7 April 2009)
8 April 2009 to 31 December 2009
1 January 2010 to 7 December 2010
8 December 2010 to 6 December 2011
|7 December 2011 to 5 December 2012||6 December 2012 to 13 October 2015||14 October 2015 to 11 October 2016|
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 valuation date will normally be the date of death in the following circumstances:
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).
Capital Acquisitions Tax is charged at 33% on gifts or inheritances made on or after 5 December 2012 (the rate was formerly 30%). 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 from 12 October 2016: €310,000). So €240,000 is taxed at 33%.
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 5 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.
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.
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.
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 is currently €32,500 and 80% of this is €26,000. Because the benefits you received exceed 80% of the tax-free threshold for Group B, you are required to make a tax return even though the total amount received is below the threshold.
Pay and File dates for CAT
Taxable gifts or inheritances with a valuation date on or after 14 June 2010 have a 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 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.
If your inheritance has a valuation date of 21 February 2017, you must complete the tax return and pay the tax on or before 31 October 2017.
If your inheritance has a valuation date of 6 November 2017, you must complete the tax return and pay the tax on or before 31 October 2018.
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:
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:
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:
Revenue can consider allowing a postponement of tax due if there is hardship involved.
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.
The following items are exempt from Capital Acquisitions Tax:
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.
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.
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 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.
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 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.
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
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.
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.
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.
If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000. The Phone Service will operate Monday to Friday, 9am to 6pm during January 2017. You can also visit your local Citizens Information Centre.