Inheritance Tax Planning –
Capital Acquisitions Tax (CAT) is the tax which is charged when you receive a gift or an inheritance. CAT comprises two separate taxes – Gift tax payable on lifetime gifts and an Inheritance tax which is payable on inheritances received on a death.
Who is liable to this tax in Ireland?
Although the beneficiary of the estate is primarily liable for the payment of CAT, whether or not a charge to tax arises is dependent on whether the disponer (the deceased person) or the beneficiary (person receiving the inheritance) is resident or ordinarily resident in the state at the date of the gift or inheritance.
If the disponer or the beneficiary is resident or ordinarily resident in Ireland, then the entire estate will be liable to CAT here.
If both the disponer and the beneficiary are not resident in Ireland, then only Irish property will be liable to tax.
Who Pays the Tax?
It is the person receiving the gift or inheritance who is liable to CAT and not the person or estate providing the benefit.
Self-Assessed Tax
On death, a Revenue Affidavit has to be completed by the personal representatives of the deceased’s estate. This Affidavit sets out details of the deceased’s assets and gives the names and addresses of beneficiaries. It is not only the assets of the estate which must be included on this form. If, for example, the proceeds of a life assurance plan have been left in trust to particular beneficiaries, even though these proceeds do not form part of the deceased’s estate, full details of the plan and the beneficiaries should be included in the Revenue Affidavit. Details of previous gifts must also be included.
CAT Rates
For new gifts and inheritances received on or after 5th December 2001 tax is calculated according to the total of all gifts and inheritances received from all sources since 5th December, 1991. The following CAT Table applies:
| Tax Rate | |
| Group Threshold | Nil |
| Balance | 33% |
The Group threshold amounts vary depending on the relationship between the beneficiary and the disponer.
| Group 1 | €310,000 | Child or Civil Partner of disponer. Or a minor child of a deceased child of the disponer or of the civil partner of the disponer, or a minor child of the civil partner of deceased child of the disponer, or the civil partner of the disponer. |
| Group 2 | € 32,500 | Where the person receiving the property is a lineal ancestor, descendant, a brother/sister. Or child of a brother/sister or the child of a civil partner of a brother or sister of the disponer. |
| Group 3 | € 16,250 | All other cases. |
Threshold amounts apply with effect from 6th December 2016.
What assets are liable to Inheritance Tax?
All assets and liabilities of the deceased must be listed when completing a tax return in relation to Inheritance Tax. Tax is levied on the total net value of all assets received by a beneficiary, other than a legal spouse or civil partner. All assets are taken into account, the family home, a second home or investment property, value of all investments including cash, pension and life assurance benefits as well as personal property e.g., house contents, jewellery etc.
Reliefs and Exemptions:
Certain reliefs and exemptions apply to certain types of assets.
The main reliefs and exemptions are:
- Spouse or Civil Partner Exemption
- Agricultural Relief
- Business Relief
- Family Home Relief
- Life Assurance Relief
Is it possible to save for a potential inheritance tax bill?
Yes, and revenue acknowledge the need to make provision by creating a specific life assurance policy called Section 72. The purpose of this policy is ultimately to pay the inheritance tax due and the proceeds of the policy should not increase the value of the estate. Therefore, a correctly structured life policy will be available to specifically pay the tax and not increase the value of the estate.