D) CAT Flashcards
A. Who pays CAT?
Tax payable on receipt of taxable gifts and inheritance.
Gift: Received anytime that is not Death
Inheritance: Received upon death.
Differences:
1. Exemption of €3,000 each year from any 1 disponer (gifter)
2. Recipient of an inheritance is a successor, recipient of a gift is donee
3. A GIFT is an INHERITANCE if giver dies within 2 years, but no clawback of Small Gift Exemption
B) Calculate CAT
Step 1) Calculate taxable value of gift
Step 2) Determine who is the disponer and find the tax-free group threshold.
Step 3) Tax is only due after threshold is met. This is a lifetime limit. (back to 05 Dec 1991)
Step 4) Apply CAT of 33% to remaining balance.
B) STEP 1 - Taxable Value
Market Value x
Less:
Liabilities, Costs, Expenses (x)
= “Encumbrance Free Value”
Less: Consideration Paid (x)
= Taxable Value
- Liabilities must be paid; funeral expenses, cost of administration, debts owed by deceased. For Gifts, include legal costs and stamp duty
- Consideration; paid for the benefit or contribution made in return for it.
B) STEP 2 - Who is the Disponer
The person who, directly or indirectly is the source of the financial benefit,
Also, the date of the gift/inheritance is the date the recipient has an immediate right to the gift, not a future right.
B) STEP 3 - Threshold
Group A: €335,000 - Parent to Child, Grandparent to Minor Child, Parent to Natural (given for adoption)
Group B: €32,500 - Lineal Descendent (GP to Grandchild), Living Child to Parent, TO Sibling or Nephew
Group C: €16,250 - Everybody Else (even FROM Niece or Nephew)
Small Gift Exemption - €3,000 annually from anyone, even married parents from the same account.
B) STEP 4 - Tax the remainder
CAT is 33%
B)Taxable Value of “Free-Use”
Free-Use is living rent free or interest-free loan or less than fair-market-value
Gift is deemed to have been received at end of the taxable year (31 December) Can apply SGE €3000
B) Taxable Value of Annuities
For Rental income: MV of Property x (Annual Benefit of Benefit/Annual Value of Property)
For other securities, Capital Sum that must be invested in government stock (Risk-Free rate) to acquire equivalent annuity income.
B) Taxable Value of Limited Interests
Life interest or certain period
Use the actuarial factors based on Gender and Age.
B) Gift Splitting - S8 Anti-avoidance
S8 CATCA 2003
Prevent passing benefit through “Middlemen” before arriving at proper Donee
Middleman must keep gift for 3 years, else deemed that 2 gifts will have occurred unless that was not the intention.
C) Territorial Scope
Y Domiciled/ Y Res/ Y Ord: Worldwide
Y Domiciled/ Y Res/ Y Ord: Worldwide
Y Domiciled/ Y Res/ Y Ord: Worldwide
N Domiciled/ Y Res/ Y Ord: Post 1.12.99 World
Y-N Domiciled/ N Res/ N Ord: Receipt of Irish Property
C) Irish Assets are always…
…Liable to Irish CAT
C) Determine if assets are Irish
Where physically located
Where DEBTOR lives
Where instrument is
Where property is physically located
Where the bank the cash is in is located
C) Difference between Date if Gift and Date of Disposition
Date of Gift is When received, Date of Inheritance is Date of Death of Disponer
D) Dwelling House Relief (Benefit)
Provides 100% relief (exemption) for dwelling house and 1 acre of land.
D) Dwelling House (Conditions - Inheritance)
- House was only/or main home of deceased.
- Beneficiary lived IN the house 3 years prior
- Beneficiary does not own, or have interest in, another house, even in same inheritance.
- House is Beneficiaries main home for six years after inheritance, unless over 65
D) Dwelling House (Conditions - Gift)
- Beneficiary is a dependent relative of gifter (Disabled)
- The house was beneficiary’s main home for 3 years prior.
- Beneficiary does not own, or have interest in, another home
- The house is the main home for 6 years after.
- House must have been owned by gifter for 3 years prior
- Gifter must not have lived in the house unless ill or old age.
D) Dwelling House (Clawback)
- No Longer applies if within 6 years:
a. You sell house and it is not replaced by another as your main home (And proceeds above and beyond can be clawed back in proportion.
b. You no longer live in the home (unless you have ill health or employment commitments)
c. You subsequently “inherit” any other dwelling hose from same disponer.
E) Other CAT Exemptions
- Support, Maintenance and Education
- Paid to child. - Under 18 years. or 18 to 25 in school (uni), - Unable to maintain themselves permanently due to disability (no age limit)
- Must be a “Normal Amount” for these circumstances. - A Reasonable amount in relation to person making Gift.
E) Other CGT Exemptions (Spouses)
Transfers between spouses are exempt. For CAT, they do not need to be living together. Or cohabitant of 2 years with children or 5 years without children.
E) Other CGT Exemptions (Government Securities)
Exemption if Disponer and Disponee are neither Domiciled nor Ordinary Resident
E) Heritage Exemption
-Works of Art, Books, Jewellery, Manuscripts
1. Item is of National Importance
2. Item is kept permanently by the State
3. Reasonable facilities are made for viewing.
-Clawback if:
1. Sold in 6 years (unless to Natinal institution)
2. Moved outside of the State or viewing facilites withdrawn.
3. Beneficiary Dies
4. Object is passed on as absolute gift to beneficiary who is not a spouse
E) Exemption for Disability Expenses
Medical Care and maintenance costs.
E) Inheritance from Child to Parent (Childs’ Death)
If child had received a gift from parents within 5 years.
E) S72 - CAT insurance
The policy taken our to pay for CAT and approved by Revenue.
E) Surrender of Securities
Discharge Inheritance tax with 2000/2005 6.5% government securities
E) Other Exepmtions
- Compensation from damages
- Winnings from betting, lottery
- Payment given to reduce debt if you are bankrupt
- An agreement from a creditor to reduce debt from a bankrupt person
- A markdown of debt under Debt Relief Notice or Personal Insolvency
- Damages for any wrong or injury suffered for death of another person
- Benefits for Charitable purposes
F) Disclaimers and S12
-If you inherit a property and then disclaim for a named person, you will get charged CAT twice.
-You may disclaim for an “Unnamed person”. This is S12
Disclaimers Position:
1. No longer liable to CAT
2. Can disclaim for consideration
3. Can’t partially disclaim
F) S12 Rules
- Legacy disclaimer falls to residue of State
- Interest disclaimed, residue is distributed as an intestacy (No will) and not to other persons left in residue (part of the estate not mentioned in the will)
- Interest in Residue cannot be partially disclaimed
- A person who is left 2 separate and distinct legacies(any physical property, usually land) can disclaim one and not the other
*Dies in Testate means With a Will
G) Agricultural Relief - Definition
Allows a qualifying farmer to use a reduced taxable value (90% of value of Agri Assets) when calculating CAT on AGRICULTURAL Property
G) Agricultural Relief - What 2 test must be fulfilled
- Active Farmer Test:
a. Farm Management Qualification (within 4 years) and farms the property for 6 years OR
b. Spends 50% of normal working time on the farm on a commercial basis for 6 years. OR
c. Leases the whole or most of the farm for 6 years to someone who is A or B - 80% Argi Assets Test: 80% of the persons’ property is agri-property without deduction of farm debts, calculated on valuation date.
You can rearrange your assets to accommodate the rule.
G) Agricultural Relief - Define Ag Property
- Located in EU
- Land, pasture, woodland
- Farm House and out buildings
- Machinery, livestock, crops, trees, EU Single farm payment
- Ag land with Solar Panels <50% of land
- Or other assets deemed to be invested in ag land, you have 2 years but you pay CAT first then get rebate.
G) Agricultural Relief - Calculation
Market Value X
Less Liabilities (X)
= Encumbrance Free Value X
Less Consideration (X)
= Taxable Value X
90% Relief (.9X)
= Reduced taxable Value X
Then
Less: Group Threshold (X)
Less: SGE (X)
= Taxable Value X
33% Tax (.33X)
Less: CGT Offset (X)
=CAT Payable X
G) Agricultural Relief - Anti-Avoidance
Clawback may happen if:
- Property sold within 6 years and not replaced with other agri land.
- Gift/Inheritance consists of development value and is not retained for 10 years
- Proceeds only partially reinvested
- Individual ceases to be a farmer within 6 years
H) Business Relief - Definition
Allows individual to used a reduce value (90%) of business assets when calculating CAT on gift or inheritance.
H) Business Relief - Conditions
- Business must not be mostly a holding company or hold currency or land.
- Only applies to qualifying assets.
- Sole Traders/Farmers/Partners - Relief apples to NET assets used in trade (not residential or investment property) Excludes farmhouse, but that would work with AR. NET assets are MV of assets less mV of Debts. Assets must be owned for 5 prior years for gist and 2 years for inheritance. (No minimum for AR)
- Shareholders - Relief applies to % of the value of shares derived from qualifying activities. Must be owned for 5 prior years as gift, 2 years for inheritance. Business assets owned by disponer but used by company which is controlled by the disponer and transferred at same time to same person as other assets also qualify.
- Additional Rule for Shareholders:
The successor must hold AFTER receipt:
- more than 25% of the shares in company OR
- Together with relatives control the company (10% + 40% = control) OR
- at least 10% of shares and worked full-time for at least 5 years up to date of gift/inheritance
H) Business Relief - Calculation
Market Value of Assets X
Less: Inheritance expenses (X)
= Encumbrance Free Value X
Less: Consideration Paid (X)
=Taxable Value X
Less: BR 90% (.9x)
=Reduced Taxable Value X
Then:
Less Group Threshold (X)
Less SGE (X)
= Taxable Value X
CGT 33% .33X
Less CGT Offset (X)
CAT Payable X
H) Business Relief - Anti-Avoidance
Full Clawback of relief occurs if:
- Business property is disposed and not replaced within a year or ceases to be a business property
- In the case of a shares, the shareholding is not maintained.
- Where the full proceeds of any sale are not reinvested in a year
- The gift/inheritance consists of development value and is not retained for 10 years.
I) CGT/CAT Offset
CGT is NOT payable on death but is payable on disposal during lifetime.
CGT arising at time of gift may be credited against CAT of same transaction up to the value of the CAT.:
- Beneficiary must retain the asset for 2 years
- Must be same event
- Must be same assets
If you inherited an asset or received a gift and then immidiately gift or sell it, there will be no CGT payable because there will be no increase in value as you disposed of it immidiately.
