Capital Acquisitions Tax (CAT) is a tax on gifts and inheritances that is payable by the beneficiary of the gift or inheritance on the value of the property received.
The relationship between the person giving a gift or inheritance and the beneficiary determines the maximum amount, known as the “Group threshold”, below which CAT does not arise.
Any prior gift or inheritance received by a beneficiary since 5 December 1991 from within the same Group threshold is aggregated for the purposes of determining whether tax is payable on a benefit.
Where a person receives a gift or inheritance and the value of the property received exceeds the relevant Group threshold, CAT at a rate of 33% applies on the excess.
There are three Group thresholds:
• the Group A threshold (currently €400,000) applies where the beneficiary is a child of the person giving the gift or inheritance;
• the Group B threshold (currently €40,000) applies where the beneficiary is a brother, sister, nephew, niece, lineal ancestor or lineal descendant of the person giving the gift or inheritance;
• the Group C threshold (currently €20,000) applies in all other cases.
In addition to the above, a person may receive gifts up to the value of €3,000 from any person in any calendar year without having to pay CAT. This is generally referred to as the small gifts exemption.
Gifts within this limit are not taken into account in computing tax and are not included for future aggregation purposes.
The effect of this is that a person can take a gift from several people in the same calendar year and the first €3,000 from each person is exempt from CAT. In addition, where the value of a gift from a person exceeds €3,000, only the excess is taken into account for calculating CAT.
The gift exemption applies only to gifts and not to inheritances.
I am advised by Revenue that it is not currently possible to cost an increase in the Small Gift Exemption as it is not possible to forecast how many would avail or benefit from the increased level of the exemption, and to what amount.
Finally, the Deputy should note that any further changes to Capital Acquisition Tax and its related reliefs and exemptions must be considered among various other demands within the overall Budget package, as they have been in the past. In that regard, you should note that Capital Acquisitions Tax is kept under review annually by my officials throughout the Finance Bill cycle.
