What is Capital Acquisitions Tax (CAT)?
Gift and Inheritance Tax
Gifts and inheritances of any property may be liable to gift or inheritance tax known as Capital Acquisitions Tax (CAT). CAT is charged on the transfer of any type of property including but not limited to buildings, lands, cash, bank accounts, cars, shares, sites and anything which has a value.
CAT arises if the value of the gift or inheritance exceeds a limit known as the tax-free threshold or amount. The tax-free amount depends on the relationship between the person who provides the gift/inheritance and the person who receives the gift/ inheritance. These tax-free amounts are ring-fenced so you have a tax-free amount in respect of each category of individuals or group as set out in the table below.
The tax-free amount is a cumulative lifetime limit, so once you exceed the tax-free amount you are liable to pay the tax at the rate of 33 on the excess.
| Group | Recipient’s relationship to the provider of the gift or inheritance | Tax-free amount |
|---|---|---|
| 1 | Son or daughter | €400,000 |
| 2 | Parent, brother, sister, niece, nephew or grandchild | €40,000 |
| 3 | Relationship other than Group 1 or Group 2 | €20,000 |
How is the tax calculated?
CAT is calculated on the excess value of the gift/inheritance over the relevant tax-free amount. For example if you receive a gift or an inheritance of a house from an uncle/aunt valued at €300,000 then you are liable to CAT as follows:
Example CAT calculation
If you inherit another house from a brother/sister or any other individual within that particular group (group 2 in the table above) then you would be liable to tax at 33% on the full amount of the second inheritance as you have already used your available tax-free amount for that particular group (group 2) on the first inheritance/gift of property.
Who is responsible for the tax?
The person who receives the gift or inheritance is responsible for the payment of the tax.
Are there any exemptions?
There are a number of exemptions from CAT that depend on the type of the gift or inheritance. The following are free from CAT:
Gifts or inheritances from your spouse
Payments for damages or compensation
Payments used only for the medical expenses of a person who is permanently incapacitated due to physical or mental illness
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.
Gifts or inheritances of businesses/farms subject to certain conditions.
There are a number of ways to minimise any potential CAT liability so you should consult your solicitor or accountant about CAT prior to transferring any assets or before making your Will.
Capital Acquisitions Tax (CAT) is a tax on gifts and inheritances.
You may receive benefits up to the relevant lifetime tax-free threshold before CAT is payable. The current rate is 33%, in force since 6 December 2012. The giver is the disponer and the recipient is the beneficiary.
A gift becomes an inheritance if the disponer dies within two years.
What can be taxed?
Money in financial accounts, including a credit union account passing under a nomination, and cash
Houses, land, household contents, paintings, jewellery, cars, stocks and shares
Free use of property, an interest-free loan, a limited interest or right of residence
A discretionary-trust benefit or an additional share inherited from a joint owner
Calculating CAT
Revenue calculates CAT automatically when a return is filed through myAccount or ROS. Liability depends on the benefit's value, your relationship to the disponer and earlier benefits within the same group threshold.
The gift or inheritance date determines the threshold and rate; the benefit is valued on the valuation date. CAT applies only above the available threshold, after any reliefs, exemptions and credits. Aggregate earlier benefits received in the same group since 5 December 1991. If the available threshold is not exceeded, no CAT is due.
Special rules
Gift splitting occurs where a gift is passed to someone in a different group within three years and can change the applicable threshold. If the disponer pays the CAT, that tax is added to the value of the benefit.
Filing and payment
Valuation date from 1 January to 31 August: pay by 31 October that year
Valuation date from 1 September to 31 December: pay by 31 October the following year
Returns may be filed online or on paper. Payment may be made online, by debit or credit card, or by Electronic Funds Transfer.
Late filing
Less than two months late: 5% of the tax, capped at €12,695
More than two months late: 10% of the tax, capped at €63,485
Reduced interest may apply to CAT paid by instalments on agricultural or relevant business property. A late instalment attracts the normal daily rate.
The material contained in this article is for general guidance only and does not constitute legal or other professional advice. You should seek legal advice from your own Solicitor. Every effort has been made to ensure the accuracy of the content and no liability whatsoever is accepted by Murphy Rice & Co for any action taken in reliance on any information in this article. 