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.

Gifts and Inheritance Tax – Big Changes from 14 June

May 28, 2010

Capital Acquisitions Tax (CAT) is the tax which is levied on gifts and inheritances. The December 2009 Budget announced some major changes to how this tax is administered. These changes come into effect on 14 June next.

Inheritance Tax Changes on 14 June

The main changes are as follows:

  • The annual Pay & File deadline of 31 October, that already applies to Income Tax, will now also extend to CAT on gifts and inheritances. Where a person receives a gift or inheritance between 1 September and 31 August in a given year, they are obliged to file a gift/inheritance tax return (Form IT38) with Revenue, and pay any liability arising, by the following 31 October.
  • The IT38 tax return must be filed online using the Revenue ROS system, except in a very limited range of circumstances, where a new paper form, Form IT38S, can be used.
  • Where a person has received a gift or inheritance since 1 September 2009, their deadline for paying their CAT tax liability and making their Form IT38 tax return is now extended to 31 October 2010 provided they pay & file online on ROS.  The same deadline also applies to gifts and inheritances received between now and 31 August next.
  • Where a person receives a gift or inheritance in the period between 1 September 2009 and 31 August 2010, they must pay the tax and file their return by 31 October 2011.

Revenue have today published a detailed notice explaining the changes.