What is Capital Acquisitions Tax?

June 13, 2018

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. Once due it is charged at the current rate of 33% (valid from 6 December 2012).

For the purpose of Gift and Inheritance Tax, the relationship between the person who provided the gift or inheritance (i.e. the Disponer) and the person who received the gift or inheritance (i.e. the beneficiary), determines the maximum tax-free threshold known as the "group threshold". The date of death or date of gift indicates the relevant year for the correct amount.

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

Current CAT thresholds (from 12 October 2016)

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.

Exemptions: The first €3,000 of the total value of all gifts received from any one person in any calendar year is exempt. So, you could receive a gift from several people in the same calendar year and the first €3,000 from each person is exempt from CAT. This exemption does not apply to inheritances.

Dwelling House Exemption: If you inherit a house and you qualify for the Dwelling House Exemption, you will not have to pay Capital Acquisitions Tax (CAT) on that inheritance. The Finance Act 2016 introduced changes to the qualifications which apply to inheritances on or after 25 December 2016. You will be exempt from CAT on a house you inherit if:

  • the house was the only or main home of the person who died
  • you lived in the house as your main home for the three years before the person’s death
  • you do not own, have an interest or a share in any other house, including one you acquired as part of the same inheritance
  • the house is your main home for six years after you receive the inheritance. This does not apply if you are over 65.

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.

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.  

To qualify for the relief, the following conditions must be satisfied: The property/assets received must constitute ‘agricultural property’ at the date of the gift or at the date of death, in the case of an inheritance. They must also constitute ‘agricultural property’ on the valuation date, if this is different from the date of the gift or inheritance.

The beneficiary must satisfy the ‘80% agricultural property’ test on the valuation date after taking the property/assets. The beneficiary, or lessee where the beneficiary leases the agricultural property, must satisfy the various ‘active farmer’ requirements.

In relation to gifts and inheritances taken before 1 January 2015, the only ‘farmer’ test that applied was the ‘80% agricultural property’ test. There was no requirement for the ‘farmer’ to actually be a farmer. However, in the case of gifts and inheritances taken on or after 1 January 2015 the ‘active farmer’ tests also apply.

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.

For expert accounting and taxation services please contact us at McEvoy Craig Accountants & Auditors