Capital Acquisitions Tax (CAT) is a tax on gifts and inheritances. Inheritance tax may have to be paid on an inheritance inherited on the death of any person (e.g. under a Will or on intestacy). Gifts and inheritances between spouses and civil partners are exempt.
Tax Free Threshold
A gift or inheritance from a spouse or civil partner is not liable to inheritance tax. This will only apply to a legal spouse or civil partner and to divorced persons or where a civil partnership is terminated in certain circumstances. A “cohabitant” or “partner” in the general meaning (i.e. not a “civil partner”) is treated as a stranger for tax purposes.
If you leave property by Will to someone other than a spouse or civil partner then the first portion, known as the tax free threshold, is taken free of tax. The amount of the tax free threshold depends on your relationship to the beneficiary and will also depend on whether any other benefits have been received.
For instance where you leave property to a child or a child of your civil partner, or a minor child of a deceased child or, in certain circumstances, to a foster child or to a parent (in an unrestricted form) then the tax free threshold is the largest; known as the Group A threshold. If the property is left to a parent (where it is a restricted interest), brother or sister, niece or nephew, or grandchild, then Group B threshold applies, and if property is left to anyone else (for example a friend, in law, cousin or “partner”) then Group C threshold applies. The tax free thresholds are updated annually, usually in January in line with inflation.
CAT thresholds for inheritances or gifts
| Group A | Group B | Group C | |
|---|---|---|---|
| On or after 9 October 2019 | €335,000 | €32,500 | €16,250 |
| 10 October 2018 – 08 October 2019 | €320,000 | €32,500 | €16,250 |
| 12 October 2016 – 09 October 2018 | €310,000 | €32,500 | €16,250 |
| 14 October 2015 – 11 October 2016 | €280,000 | €30,150 | €15,075 |
| 06 December 2012 – 13 October 2015 | €225,000 | €30,150 | €15,075 |
| 07 December 2011 – 05 December 2012 | €250,000 | €33,500 | €16,750 |
However, if a person has received other gifts or inheritances since 5 December 1991 they are added together (aggregated) according to certain rules relating to the date on which the gifts were received and from whom they were received. The effect of this may be to reduce or remove the tax free threshold available. If aggregation does apply, then the tax bite may prove disproportionate and professional advice should be sought.
What happens if the threshold is used up?
Inheritance tax is paid on the balance of the inheritance at the rate that applies on death, The standard rate of tax is 33% in respect of gifts and inheritances taken on or after 6th December 2012.