The ‘Inheritance Tax Trap’ That Hurts Us All

June 8, 2015

It is great to see the Irish Independent today highlighting the Inheritance Tax trap, where ordinary families are being hit by enormous tax charges on even modest inheritances.

The tax free threshold for parent-child gifts and inheritances has been cut by almost 60% since 2009.

Now, increasing property prices mean that more families than ever are being hit by Capital Acquisitions Tax (CAT).

The Inheritance Tax Trap

Worse still, CAT is now levied at 33%. This represents a breathtaking 65% hike on the 20% rate that applied up to November 2008.

This is bad news, and not just for those receiving inheritances and gifts:

  • The high rates and low thresholds actually stifle the tax take from CAT, as people who hold even modest levels of wealth are discouraged from gifting them to family members until after their deaths.
  • Such wealth-hoarding is particularly unproductive in the Irish economy which has suffered a major credit squeeze since 2008.

The situation is actually much worse for those who wish to leave assets to nieces, nephews or other relatives, where the tax-free thresholds are pitifully low.

Our high CAT regime is clearly delaying economic recovery, and must be reformed without delay.

For more, see Charlie Weston’s article and opinion piece, and the paper’s editorial in today’s Irish Independent.

31 October 2012 Tax Deadline – 3 Weeks To Go

October 10, 2012

We are now only three weeks away from the 31 October tax deadline. This year, the annual Halloween “Pay & File” date is more important, and covers more taxes, than ever before.

31 October 2012 is the deadline to:

  • File a Form 11 Self-assessment Income Tax return  for 2011
  • Pay any remaining Income Tax liability for 2011
  • Pay Preliminary Tax liability for 2012
  • File a 2011 Capital Gains Tax Return, if you have made a Capital Gain in 2011.
  • File a Capital Acquisitions Tax Return if you received a Gift or Inheritance in the period from 1 September 2011 to 31 August 2012.
  • Pay a Capital Acquisitions Tax liability arising from a Gift or Inheritance in the period from 1 September 2011 to 31 August 2012.
  • Pay Domicile Levy  and file a Domicile Levy Form DL 1 tax return.
  • Make a backdated RAC, AVC and PRSA pension payment to claim tax relief for 2011.

It’s worth noting that the 31 October deadline affects all classes of taxpayers, not just the self-employed or those on high incomes. If you think you need to file a return, or make a tax payment this October, give yourself plenty of time to avoid the late end-of-month rush.

If you don’t fully understand all aspects of your tax position, you should strongly consider getting an experienced accountant or tax specialist to advise your on your liabilities and file your return on your behalf. Don’t leave it too late though, as all accountants and tax experts will have a heavy workload in the coming weeks.

For more detail, see my recent article on the 31 October deadline for Contemporary Living.

The Finance Bill – some initial thoughts

February 4, 2010

Some initial thoughts on the changes announced in today’s Finance Bill

  • The mooted changes to the Capital Acquistions Tax system are welcome, IF they help to simplify how CAT works and remove some of the anomalies in the system.  Until we see the detail of the changes, it will be impossible to tell whether these objectives will be met.
  • The imposition of VAT on refuse charges and other local services was inevitable since last year’s European Court ruling. That said, it is unfortunate that this measure will be accompanied by the scrapping of tax relief on service charges.  I estimate that this latter move will cost most householders €60-80 per year, from 2012.  In addition, the VAT charge will add a further €40-€55 to typical annual household refuse bills.  An unfortunate double-hit for consumers and families.
  • Tax relief on service charges was always one of the tax reliefs that many taxpayers simply forgot to claim each year. At least its removal will make it a little easier for an individual to correctly complete their own tax return.  Every cloud has …
  • The curbing of the 80% Windfall Tax is very welcome. Farmers and small landowners will not now have to worry about a punitive tax, when they wish to  sell an individual site  or give a site to their son or daughter.  This move might just give a little, and much-needed, boost to rural builders and tradesmen.  In the current climate the limit of €250,000 per 1-acre site is unlikely to affect (or worry) too many people.

More anon…

The 2010 Finance Bill is unveiled

February 4, 2010

The 2010 Finance Bill has been published earlier this afternoon.  In addition to the measures announced in the Budget, it contains a raft of new provisions, including the following:

  • A new package of reforms to the Capital Acquisitions Tax system,  which are designed “to modernise and simplify the CAT regime, while delivering immediate and significant benefits to taxpayers, their legal advisers and the Revenue Commissioners”.
  • Minister for Finance, Brian Lenihan

  • Measures to facilitate the development in Ireland  of Islamic finance which  is compliant with the principles of Shari’a law.
  • From 1 July 2010, VAT will apply to Public Bodies and local authorities, for waste collection, landfill, and recycling services; off-street parking; toll roads; and leisure facilities).  This follows a 2009 European Court of Justice (ECJ) ruling against Ireland. The changes will not affect education, health, water and passenger transport services.
  • The abolition of  certain Tax Reliefs including tax relief on Service/Refuse charges (from 2012 onwards), relief for Gifts of property to the State and Capital Allowances for childcare facilities.
  • Confirmation that the 80% Windfall Tax will now not apply to the sale of one-off sites below an acre and €250,000.
  • Technical changes to procedures in relation to tax relief for medical expenses. According to the Dept of Finance “he relief is being refocused on expenses incurred by or on the advice of a medical practitioner”.
  • The scrapping of the 1% Levy on pension products “in order not to discourage investment in pensions”.
  • The introduction of transfer pricing legislation to regulate trading between associated companies.
  • Measures to combat the misuse of tax avoidance schemes.

Capital Acquisitions Tax 2010 Thresholds

January 20, 2010

The Revenue have published Capital Acquisitions Tax Group Thresholds for gifts and inheritances received in 2010.

The Thresholds are adjusted annually in line with inflation. The 2010 Thresholds are as follows:

Group A €414,799. This applies to gifts & inheritances from a parent.

Group B €41,481.  This applies to gifts & inheritances received from a brother, sister, aunt or uncle, niece or nephew, grandparent and most other close relatives.

Group C €20,740. This applies to to all gifts & inheritances not covered by Groups A and B.