CAT Overview
Capital Acquisitions Tax Consolidation Act
2003 (Number 1 of 2003)
Number 1 of 2003
CAPITAL ACQUISITIONS TAX CONSOLIDATION ACT 2003
AN ACT TO CONSOLIDATE ENACTMENTS RELATING TO CAPITAL ACQUISITIONS TAX.
[21st February 2003]
BE IT ENACTED BY THE OIREACHTAS AS FOLLOWS:
PART 1
Preliminary
1Short title.
This Act may be cited as the Capital Acquisitions Tax Consolidation Act 2003.
General interpretation.
[CATA 1976 s2]
(1)In this Act, unless the context otherwise requires—
“absolute interest”, in relation to property, includes the interest of a person who has a general power of appointment over the property;
“accountable person” means a person who is accountable for the payment of tax by virtue of section 45 ;
“Appeal Commissioner” has the meaning given to it by section 2 of the Finance (Tax Appeals) Act 2015;
“benefit” includes any estate, interest, income or right;
“child” includes—
(a)a stepchild;
(b)a child who is adopted under an adoption order within the meaning of section 3(1) of the Adoption Act 2010 or the subject of an intercountry adoption effected outside the State and recognised under that Act;
“child of the civil partner” in relation to an individual, means a child of the individual’s civil partner who was born before the registration of their civil partnership or during their civil partnership;
“civil partner” means a civil partner within the meaning of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010;
“civil partnership” means—
(a)a civil partnership registration referred to in section 3(a) of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010, or
(b)a legal relationship referred to in section 3(b) of that Act;
“Collector” means the Collector-General appointed under section 851 of the Taxes Consolidation Act 1997;
“Commissioners” means the Revenue Commissioners;
“date of the disposition” means—
(a)in the case of a will, the date of the testator’s death,
(b)in the case of an intestacy or a partial intestacy, the date of death of the intestate,
(c)in the case of a benefit under Part IX or section 56 of the Succession Act 1965, the date of death of the relevant testator or other deceased person, and correspondingly in the case of an analogous benefit under the law of another territory,
(d)in the case of a disposition which consists of the failure to exercise a right or a power, the date of the latest time when the disponer could have exercised the right or the power if that disponer were sui juris and not under any physical disability, and
(e)in any other case, the date on which the act (or where more than one act is involved, the last act) of the disponer was done by which that disponer provided or bound that disponer to provide the property comprised in the disposition;
“date of the gift” means the date of the happening of the event on which the donee, or any person in right of the donee or on that donee’s behalf, becomes beneficially entitled in possession to the benefit, and a reference to the time when a gift is taken is construed as a reference to the date of the gift;
“date of the inheritance” means—
(a)in the case where the successor or any person in right of the successor or on that successor’s behalf becomes entitled in possession to the benefit on the happening of any such event as is referred to in section 3(2), the date of the event,
(b)in the case of a gift which becomes an inheritance by reason of its being taken under a disposition where the date of the disposition is within 2 years prior to the death of the disponer, the date which would have been the date of the gift if the entitlement were a gift, and
(c)in any other case, the date of the latest death which had to occur for the successor, or any person in right of the successor or on that successor’s behalf, to become beneficially entitled in possession to the benefit,
and a reference to the time when an inheritance is taken is construed as a reference to the date of the inheritance;
“decree of dissolution” means a decree under section 110 of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010;
“discretionary trust” means any trust whereby, or by virtue or in consequence of which—
(a)property is held on trust to accumulate the income or part of the income of the property, or
(b)property (other than property to which for the time being a person is beneficially entitled for an interest in possession) is held on trust to apply, or with a power to apply, the income or capital or part of the income or capital of the property for the benefit of any person or persons or of any one or more of a number or of a class of persons whether at the discretion of trustees or any other person and notwithstanding that there may be a power to accumulate all or any part of the income;
“disponer”, in relation to a disposition, means the person who, for the purpose of the disposition, directly or indirectly provided the property comprised in the disposition, and in any case where more than one person provided the property each is deemed to be the disponer to the extent that that disponer so provided the property; and for the purposes of this definition—
(a)the testator is the disponer in the case of a disposition referred to in paragraph (k) of the definition of “disposition”,
(b)the intestate is the disponer in the case of a disposition referred to in paragraph (l) of that definition,
(c)the deceased person referred to in paragraph (m) of that definition is the disponer in the case of a disposition referred to in that paragraph, and
(d)a person who has made with any other person a reciprocal arrangement by which that other person provided property comprised in the disposition is deemed to have provided that property;
“disposition” includes—
(a)any act or omission by a person as a result of which the value of that person’s estate immediately after the act or omission is less than it would be but for the act or omission,
(b)any trust, covenant, agreement or arrangement, whether made by a single operation or by associated operations,
(c)the creation of a debt or other right enforceable against the disponer personally or against any estate or interest that disponer may have in property,
(d)the payment of money,
(e)the allotment of shares in a company,
(f)the grant or the creation of any benefit,
(g)the grant or the creation of any lease, mortgage, charge, licence, option, power, partnership or joint tenancy or other estate or interest in or over any property,
(h)the release, forfeiture, surrender or abandonment of any debt or benefit, or the failure to exercise a right, and, for the purpose of this paragraph, a debt or benefit is deemed to have been released when it has become unenforceable by action through lapse of time (except to the extent that it is recovered subsequent to its becoming so unenforceable),
(i)the exercise of a general power of appointment in favour of any person other than the holder of the power,
(j)a donatio mortis causa,
(k)a will or other testamentary disposition,
(l)an intestacy, whether total or partial,
(m)the payment of a share as a legal right under Part IX of the Succession Act 1965, to a deceased person’s spouse or civil partner, or the making of provision for a widow, surviving civil partner or child of a deceased person under section 56 or section 117 of the Succession Act 1965, or an analogous share or provision paid or made on the death of a deceased person to or for the benefit of any person under the law of another territory, and
(n)a resolution passed by a company which is deemed by subsection (3) to be a disposition;
“donee” means a person who takes a gift;
“entitled in possession” means having a present right to the enjoyment of property as opposed to having a future such right, and without prejudice to the generality of the foregoing a person is also, for the purposes of this Act, deemed to be entitled in possession to an interest or share in a partnership, joint tenancy or estate of a deceased person, in which that person is a partner, joint tenant or beneficiary, as the case may be, but that person is not deemed to be entitled in possession to an interest in expectancy until an event happens whereby this interest ceases to be an interest in expectancy;
“general power of appointment” includes every power, right, or authority whether exercisable only by will or otherwise which would enable the holder of such power, right, or authority to appoint or dispose of property to whoever the holder thinks fit or to obtain such power, right or authority, but exclusive of any power exercisable solely in a fiduciary capacity under a disposition not made by the holder, or as mortgagee;
“gift” means a gift which a person is by this Act deemed to take;
“the Income Tax Acts” has the meaning assigned to it by section 2section 1(2) of the Taxes Consolidation Act 1997;
“inheritance” means an inheritance which a person is by this Act deemed to take;
“interest in expectancy” includes an estate in remainder or reversion and every other future interest, whether vested or contingent, but does not include a reversion expectant on the determination of a lease;
“limited interest” means—
(a)an interest (other than a leasehold interest) for the duration of a life or lives or for a period certain, or
(b)any other interest which is not an absolute interest;
“local authority” means a local authority for the purposes of the Local Government Act 2001 (as amended by the Local Government Reform Act 2014) and includes a body established under the Local Government Services (Corporate Bodies) Act 1971;
“market value”, in relation to property, means the market value of that property ascertained in accordance with sections 26 and 27 ;
“minor child” means a child who has not attained the age of 18 years and is not and has not been married;
“personal property” means any property other than real property;
“personal representative” means the executor or administrator for the time being of a deceased person and includes—
(a)any person who takes possession of or intermeddles with the property of a deceased person,
(b)any person having, in relation to the deceased person, under the law of another country, any functions corresponding to the functions, for administration purposes under the law of the State, of an executor or administrator;
“property” includes rights and interests of any description;
“real property” means real and chattel real property;
“regulations” means regulations made under section 116 ;
“relative” means a relative within the meaning of subsection (4) ;
“return” means such a return as is referred to in section 46 ;
“share”, in relation to a company, includes any interest whatever in the company which is analogous to a share in the company, and “shareholder” shall be construed accordingly;
“special power of appointment” means a power of appointment which is not a general power of appointment;
“successor” means a person who takes an inheritance;
“surviving civil partner”, in relation to 2 individuals who were civil partners of each other until the death of one of them, means the civil partner other than the civil partner who died;
“tax” means any tax chargeable under this Act;
“the Tax Acts” has the meaning assigned to it by section 1(2) of the Taxes Consolidation Act 1997;
“valuation date” has the meaning assigned to it by section 30 ;
“year of assessment” has the meaning assigned to it by section 2 of the Taxes Consolidation Act 1997.
(1A)For the purposes of the definition of ‘discretionary trust’ in subsection (1), any entity which is similar in its effect to a discretionary trust shall be treated as a discretionary trust irrespective of how it is described in the place where it is established.
(1B)Any reference in this Act to trustees in relation to a discretionary trust shall be deemed to include persons acting in a similar capacity to trustees in relation to an entity referred to in subsection (1A).
(2)For the purpose of the definition of “general power of appointment” contained in subsection (1), a person is deemed to have a general power of appointment—
(a)notwithstanding that the person is not sui juris or is under a physical disability,
(b)over money which the person has a general power to charge on property, and
(c)over property of which the person is tenant in tail in possession.
(3)For the purpose of the definition of “disposition” contained in subsection (1), the passing by a company of a resolution which, by the extinguishment or alteration of the rights attaching to any share of the company, results, directly or indirectly, in the estate of any shareholder of the company being increased in value at the expense of the estate of any other shareholder, is deemed to be a disposition made by that other shareholder if that other shareholder could have prevented the passing of the resolution by voting against it or otherwise; and in this subsection, “share” includes a debenture and loan stock and “shareholder” includes a debenture holder and a holder of loan stock.
(4)For the purposes of this Act, the following persons and no other person are relatives of another person, that is—
(a)the spouse of that other person,
(b)the father, mother, and any child, uncle or aunt of that other person,
(c)any child (other than that other person), and any child of a child, of any person who is by virtue of paragraph (a) or (b) a relative of that other person, and
(d)the spouse of a person who is by virtue of paragraph (b) or (c) a relative of that other person,
(e)the grandparent of that other person.
(5)For the purposes of this Act, the relationship between a child, adopted in the manner referred to in paragraph (b) of the definition of “child” contained in subsection (1), and any other person, or between other persons, that would exist if such child had been born to the adoptor or adoptors in, is deemed to exist between such child and that other person or between those other persons, and the relationship of any such child and any person that existed prior to that child being so adopted is deemed to have ceased.
(6)For the purposes of this Act—
(a)a reference to a person being resident in the State on a particular date is construed as a reference to that person being resident in the State in the year of assessment in which that date falls (but, for those purposes, the provisions of Part 34 of the Taxes Consolidation Act 1997, relating to residence of individuals is not construed as requiring a year of assessment to have elapsed before a determination of whether or not a person is resident in the State on a date falling in that year may be made), and
(b)a reference to a person being ordinarily resident in the State on a particular date is construed as a reference to that person being ordinarily resident in the State in the year of assessment in which that date falls.
(7)In this Act, references to any enactment are, unless the context otherwise requires, construed as references to that enactment as amended or extended by any subsequent enactment.
(8)In this Act, a reference to a Part, Chapter, section or Schedule is a reference to a Part, Chapter, section of, or Schedule to, this Act, unless it is indicated that reference to some other enactment is intended.
(9)In this Act, a reference to a subsection, paragraph, subparagraph, clause or subclause is to the subsection, paragraph, subparagraph, clause or subclause of the provision (including a Schedule) in which the reference occurs, unless it is indicated that reference to some other provision is intended.
3Meaning of “on a death”.
[CATA 1976 s3]
(1)In this Act, “on a death”, in relation to a person becoming beneficially entitled in possession, means—
(a)on the death of a person or at a time ascertainable only by reference to the death of a person,
(b)under a disposition where the date of the disposition is the date of the death of the disponer,
(c)under a disposition where the date of the disposition is on or after 1 April 1975 and within 2 years prior to the death of the disponer, or
(d)on the happening, after the cesser of an intervening life interest, of any such event as is referred to in subsection (2).
(2)The events referred to in subsection (1)(d) are any of the following—
(a)the determination or failure of any charge, estate, interest or trust,
(b)the exercise of a special power of appointment,
(c)in the case where a benefit was given under a disposition in such terms that the amount or value of the benefit could only be ascertained from time to time by the actual payment or application of property for the purpose of giving effect to the benefit, the making of any payment or the application of the property, or
(d)any other event which, under a disposition, affects the right to property, or to the enjoyment of that property.
PART 2
Gift Tax
4Charge of gift tax.
[CATA 1976 s4 (part)]
A capital acquisitions tax, to be called gift tax and to be computed in accordance with this Act, shall, subject to this Act and any regulations made under the Act, be charged, levied and paid on the taxable value of every taxable gift taken by a donee.
5Gift deemed to be taken.
[CATA 1976 s5; FA 1993 s121(1) (part); FA 1994 s147 (part)]
(1)For the purposes of this Act, a person is deemed to take a gift, where, under or in consequence of any disposition, a person becomes beneficially entitled in possession, otherwise than on a death, to any benefit (whether or not the person becoming so entitled already has any interest in the property in which such person takes such benefit), otherwise than for full consideration in money or money’s worth paid by such person.
(2)A gift is deemed—
(a)to consist of the whole or the appropriate part, as the case may be, of the property in which the donee takes a benefit, or on which the benefit is charged or secured or on which the donee is entitled to have it charged or secured, and
(b)if the benefit is an annuity or other periodic payment which is not charged on or secured by any property and which the donee is not entitled to have so charged or secured, to consist of such sum as would, if invested on the date of the gift in the security of the Government which was issued last before that date for subscription in the State and is redeemable not less than 10 years after the date of issue, yield, on the basis of the current yield on the security, an annual income equivalent to the annual value of the annuity or of the other periodic payment receivable by the donee.
(3)For the purposes of section 6(1)(c) and 6(2)(d), the sum referred to in subsection (2)(b) is deemed not to be situate in the State at the date of the gift.
(4)Where a person makes a disposition under which—
(a)a relative of the person,
(b)the civil partner of the person,
(c)a child of the civil partner of the person,
(d)any child of a child of the civil partner of the person,
(e)the civil partner of a person who is by virtue of section 2(4)(b) or (c) a relative of the person, or
(f)the civil partner of a child or the child of a child of the civil partner of a person,
becomes beneficially entitled in possession to any benefit, the creation or disposition in favour of the person of an annuity or other interest limited to cease on the death, or at a time ascertainable only by reference to the death, of the person, shall not be treated for the purposes of this section as consideration for the grant of such benefit or of any part of such benefit.
(5)For the purposes of this Act, “appropriate part”, in relation to property referred to in subsection (2), means that part of the entire property in which the benefit subsists, or on which the benefit is charged or secured, or on which the donee is entitled to have it so charged or secured, which bears the same proportion to the entire property as the gross annual value of the benefit bears to the gross annual value of the entire property, and the gift shall be deemed to consist of the appropriate part of each and every item of property comprised in the entire property.
(6)(a)Where a contract or agreement was entered into, under or as a consequence of which a person acquired the right, otherwise than for full consideration in money or money’s worth, to have a benefit transferred to that person, or to another in that person’s right or on that person’s behalf, and an act or acts is or are done, on or after that date, in pursuance of, or in performance or satisfaction, whether in whole or in part, of such contract or agreement, then the gift or inheritance, as the case may be, taken by or in right or on behalf of that person, is deemed to have been taken, not when the right was acquired, but either—
(i)when the benefit was transferred to that person or to another in that person’s right or on that person’s behalf, or
(ii)when that person or another in that person’s right or on that person’s behalf became beneficially entitled in possession to the benefit,
whichever is the later.
(b)In this subsection, a reference to a contract or agreement does not include a reference to a contract or agreement—
(i)which is a complete grant, transfer, assignment or conveyance, or
(ii)which was enforceable by action.
(7)(a)In paragraph (b), the expression “shares in a private company” shall be construed by reference to the meanings that “share” and “private company” have, respectively, in section 27.
(b)Where a person becomes beneficially entitled in possession to a benefit, and the property in which the benefit is taken consists wholly or partly of shares in a private company and where the consideration referred to in subsection (1), being consideration in relation to a disposition, could not reasonably be regarded (taking into account the disponer’s position prior to the disposition) as representing full consideration to the disponer for having made such a disposition, subsection (1) is deemed to apply as if “otherwise than for full consideration in money or money’s worth paid by such person” were deleted in that subsection.
6Taxable gift.
[CATA 1976 s6 (part)]
(1)In relation to a gift taken under a disposition, where the date of the disposition is before 1 December 1999, “taxable gift” in this Act means—
(a)in the case of a gift, other than a gift taken under a discretionary trust, where the disponer is domiciled in the State at the date of the disposition under which the donee takes the gift, the whole of the gift,
(b)in the case of a gift taken under a discretionary trust where the disponer is domiciled in the State at the date of the disposition under which the donee takes the gift or at the date of the gift or was (in the case of a gift taken after that disponer’s death) so domiciled at the time of that disponer’s death, the whole of the gift, and
(c)in any other case, so much of the property of which the gift consists as is situate in the State at the date of the gift.
(2)In relation to a gift taken under a disposition, where the date of the disposition is on or after 1 December 1999, “taxable gift” in this Act means—
(a)in the case of a gift, other than a gift taken under a discretionary trust, where the disponer is resident or ordinarily resident in the State at the date of the disposition under which the donee takes the gift, the whole of the gift,
(b)in the case of a gift taken under a discretionary trust where the disponer is resident or ordinarily resident in the State at the date of the disposition under which the donee takes the gift or at the date of the gift or was (in the case of a gift taken after the death of the disponer) so resident or ordinarily resident at the date of that death, the whole of the gift,
(c)in the case where the donee is resident or ordinarily resident in the State at the date of the gift, the whole of the gift, and
(d)in any other case, so much of the property of which the gift consists as is situate in the State at the date of the gift.
(2A)(a)For the purposes of subsections (1)(c) and (2)(d), any property comprising shares in—
(i)a company formed and registered under the Companies Act 2014 or an existing company within the meaning of that Act,
(ii)a body corporate referred to in subsection (1) of section 1312 of the Companies Act 2014 (other than a body that is referred to in subsection (2) of that section as an “excluded body”),
(iii)an Irish collective asset-management vehicle, or
(iv)a society registered under the Industrial and Provident Societies Acts 1893 to 2014,
shall be deemed to be situate in the State.
(b)In this subsection “shares” includes any legal or equitable interest or right in, or in relation to, a share, whether such interest or right is directly or indirectly held, and, without prejudice to the generality of the foregoing, shall be deemed to include—
(i)a share which represents ownership of an underlying share and which can be traded independently of the underlying share, and
(ii)in the case of shares held by a central securities depository (within the meaning of Regulation 909/2014 of the European Parliament and of the Council of 23 July 20141) whose rules require holders of interests in such shares to hold those interests by way of a co-ownership interest in a fungible pool of underlying shares, that co-ownership interest.
(3)For the purposes of subsections (1)(c) and (2)(d), a right to the proceeds of sale of property is deemed to be situate in the State to the extent that such property is unsold and situate in the State.
(4)For the purposes of subsection (2), a person who is not domiciled in the State on a particular date is treated as not resident and not ordinarily resident in the State on that date unless—
(a)that date occurs on or after 1 December 2004,
(b)that person has been resident in the State for the 5 consecutive years of assessment immediately preceding the year of assessment in which that date falls, and
(c)that person is either resident or ordinarily resident in the State on that date.
(5)(a)In this subsection—
“company” and “share” have the same meaning as they have in section 27 ;
“company controlled by the donee” has the same meaning as is assigned to “company controlled by the donee or successor” by section 27.
(b)For the purposes of subsection (2)(d), so much of the market value of any share in a private company incorporated outside the State (which after taking the gift is a company controlled by the donee) as is attributable, directly or indirectly, to property situate in the State at the date of the gift shall be deemed to be a sum situate in the State.
(c)Paragraph (b) shall not apply in a case where the disponer was domiciled outside the State at all times up to and including the date of the gift or, in the case of a gift taken after the death of the disponer, up to and including the date of that death or where the share in question is actually situate in the State at the date of the gift.
7Liability to gift tax in respect of gift taken by joint tenants.
[CATA 1976 s7]
The liability to gift tax in respect of a gift taken by persons as joint tenants is the same in all respects as if they took the gift as tenants in common in equal shares.
8Disponer in certain connected dispositions.
[CATA 1976 s8]
(1)Where a donee takes a gift under a disposition made by a disponer (in this section referred to as the original disponer) and, within the period commencing 3 years before and ending 3 years after the date of that gift, the donee makes a disposition under which a second donee takes a gift and whether or not the second donee makes a disposition within the same period under which a third donee takes a gift, and so on, each donee is deemed to take a gift from the original disponer (and not from the immediate disponer under whose disposition the gift was taken); and a gift so deemed to be taken is deemed to be an inheritance (and not a gift) taken by the donee, as successor, from the original disponer if—
(a)the original disponer dies within 2 years after the date of the disposition made by that original disponer, and
(b)the date of the disposition was on or after 1 April 1975.
(2)This section shall not apply in the case of any disposition (in this subsection referred to as the first-mentioned disposition) in so far as no other disposition, which was connected in the manner described in subsection (1) with such first-mentioned disposition, was made with a view to enabling or facilitating the making of the first-mentioned disposition or the recoupment in any manner of the cost of such first-mentioned disposition.
PART 3
Inheritance Tax
Chapter 1
General
9Charge of inheritance tax.
[CATA 1976 s10 (part)]
A capital acquisitions tax, to be called inheritance tax and to be computed in accordance with this Act, shall, subject to this Act and any regulations made under the Act, be charged, levied and paid on the taxable value of every taxable inheritance taken by a successor.
10Inheritance deemed to be taken.
[CATA 1976 s11; FA 1993 s123 (1) (part); FA 1994 s148 (part)]
(1)For the purposes of this Act a person is deemed to take an inheritance, where, under or in consequence of any disposition, a person becomes beneficially entitled in possession on a death to any benefit (whether or not the person becoming so entitled already has any interest in the property in which such person takes such benefit), otherwise than for full consideration in money or money’s worth paid by such person.
(2)Subsections (2), (4) and (5) of section 5 shall apply, with any necessary modifications, in relation to an inheritance as they apply in relation to a gift.
(3)For the purposes of section 11(1)(b) and 11(2)(c), the sum referred to in section 5(2)(b) is deemed not to be situate in the State at the date of the inheritance.
(4)(a)In paragraph (b), the expression “shares in a private company” is construed by reference to the meanings that “share” and “private company” have, respectively, in section 27.
(b)Where a person becomes beneficially entitled in possession to a benefit, and the property in which the benefit is taken consists wholly or partly of shares in a private company and where the consideration referred to in subsection (1), being consideration in relation to a disposition, could not reasonably be regarded (taking into account the disponer’s position prior to the disposition) as representing full consideration to the disponer for having made such a disposition, subsection (1) is deemed to apply as if “otherwise than for full consideration in money or money’s worth paid by such person” were deleted in that subsection.
11Taxable inheritance.
[CATA 1976 s12 (part)]
(1)In relation to an inheritance taken under a disposition, where the date of the disposition is before 1 December 1999, “taxable inheritance” in this Act means—
(a)in the case where the disponer is domiciled in the State at the date of the disposition under which the successor takes the inheritance, the whole of the inheritance, and
(b)in any case, other than the case referred to in paragraph (a), where, at the date of the inheritance—
(i)the whole of the property—
(I)which was to be appropriated to the inheritance, or
(II)out of which property was to be appropriated to the inheritance,
was situate in the State, the whole of the inheritance;
(ii)a part or proportion of the property—
(I)which was to be appropriated to the inheritance, or
(II)out of which property was to be appropriated to the inheritance,
was situate in the State, that part or proportion of the inheritance.
(2)In relation to an inheritance taken under a disposition, where the date of the disposition is on or after 1 December 1999, “taxable inheritance” in the Act means—
(a)in the case where the disponer is resident or ordinarily resident in the State at the date of the disposition under which the successor takes the inheritance, the whole of the inheritance,
(b)in the case where the successor (not being a successor in relation to a charge for tax arising by virtue of sections 15(1) and 20(1)) is resident or ordinarily resident in the State at the date of the inheritance, the whole of the inheritance, and
(c)in any case, other than a case referred to in paragraph (a) or (b), where at the date of the inheritance—
(i)the whole of the property—
(I)which was to be appropriated to the inheritance, or
(II)out of which property was to be appropriated to the inheritance,
was situate in the State, the whole of the inheritance;
(ii)a part or proportion of the property—
(I)which was to be appropriated to the inheritance, or
(II)out of which property was to be appropriated to the inheritance,
was situate in the State, that part or proportion of the inheritance.
(2A)(a)For the purposes of subsections (1)(b) and (2)(c), any property comprising shares in—
(i)a company formed and registered under the Companies Act 2014 or an existing company within the meaning of that Act,
(ii)a body corporate referred to in subsection (1) of section 1312 of the Companies Act 2014 (other than a body that is referred to in subsection (2) of that section as an ‘excluded body’),
(iii)an Irish collective asset-management vehicle, or
(iv)a society registered under the Industrial and Provident Societies Acts 1893 to 2014,
shall be deemed to be situate in the State.
(b)In this subsection ‘shares’ includes any legal or equitable interest or right in, or in relation to, a share, whether such interest or right is directly or indirectly held, and, without prejudice to the generality of the foregoing, shall be deemed to include—
(i)a share which represents ownership of an underlying share and which can be traded independently of the underlying share, and
(ii)in the case of shares held by a central securities depository (within the meaning of Regulation 909/2014 of the European Parliament and of the Council of 23 July 20141) whose rules require holders of interests in such shares to hold those interests by way of a co-ownership interest in a fungible pool of underlying shares, that co-ownership interest.
(3)For the purposes of subsections (1)(b) and (2)(c)—
(a)“property which was to be appropriated to the inheritance” and “property out of which property was to be appropriated to the inheritance” shall not include any property which was not applicable to satisfy the inheritance, and
(b)a right to the proceeds of sale of property is deemed to be situate in the State to the extent that such property is unsold and situate in the State.
(4)For the purposes of subsection (2), a person who is not domiciled in the State on a particular date is treated as not resident and not ordinarily resident in the State on that date unless—
(a)that date occurs on or after 1 December 2004,
(b)that person has been resident in the State for the 5 consecutive years of assessment immediately preceding the year of assessment in which that date falls, and
(c)that person is either resident or ordinarily resident in the State on that date.
(5)(a)In this subsection—
“company” and “share” have the same meaning as they have in section 27 ;
“company controlled by the donee” has the same meaning as is assigned to “company controlled by the donee or successor” by section 27.
(b)For the purposes of subsection (2)(c), so much of the market value of any share in a private company incorporated outside the State (which after taking the inheritance is a company controlled by the successor) as is attributable, directly or indirectly, to property situate in the State at the date of the inheritance shall be deemed to be a sum situate in the State.
(c)Paragraph (b) shall not apply in a case where the disponer was not domiciled in the State at the date of the disposition under which the successor takes the inheritance or where the share in question is actually situate in the State at the date of the inheritance.
12Disclaimer.
[CATA 1976 s13]
(1)If—
(a)(i)a benefit under a will or an intestacy, or
(ii)an entitlement to an interest in settled property,
is disclaimed;
(b)a claim—
(i)under a purported will in respect of which a grant of representation (within the meaning of the Succession Act 1965) was not issued, or
(ii)under an alleged intestacy where a will exists in respect of which such a grant was issued,
is waived; or
(c)a right under Part IX of the Succession Act 1965, or any analogous right under the law of another territory, is renounced, disclaimed, elected against or lapses,
any liability to tax in respect of such benefit, entitlement, claim or right shall cease as if such benefit, entitlement, claim or right, as the case may be, had not existed.
(2)Notwithstanding anything contained in this Act—
(a)a disclaimer of a benefit under a will or intestacy or of an entitlement to an interest in settled property;
(b)the waiver of a claim—
(i)under a purported will in respect of which a grant of representation (within the meaning of the Succession Act 1965) was not issued, or
(ii)under an alleged intestacy where a will exists in respect of which such a grant issued; or
(c)(i)the renunciation or disclaimer of,
(ii)the election against, or
(iii)the lapse of,
a right under Part IX of the Succession Act 1965, or any analogous right under the law of another territory,
is not a disposition for the purposes of this Act.
(3)Subsection (1) shall not apply to the extent of the amount of any consideration in money or money’s worth received for the disclaimer, renunciation, election or lapse or for the waiver of a claim; and the receipt of such consideration is deemed to be a gift or an inheritance, as the case may be, in respect of which no consideration was paid by the donee or successor and which was derived from the disponer who provided the property in relation to which the benefit, entitlement, claim or right referred to in subsection (1), arose.
13Surviving joint tenant deemed to take an inheritance, etc.
[CATA 1976 s14]
(1)On the death of one of several persons who are beneficially and absolutely entitled in possession as joint tenants, the surviving joint tenant or surviving joint tenants is or are deemed to take an inheritance of the share of the deceased joint tenant, as successor or successors from the deceased joint tenant as disponer.
(2)The liability to inheritance tax in respect of an inheritance taken by persons as joint tenants is the same in all respects as if they took the inheritance as tenants in common in equal shares.
Revenue Manual
1.1 Capital Acquisitions Tax
Capital Acquisitions Tax (CAT), comprising both a Gift Tax and an Inheritance Tax, was introduced by the Capital Acquisitions Tax Act 1976 (CAT Act). Over the years the CAT Act provisions were amended and extended by various Finance Acts.
Capital Acquisitions Tax provides for the taxation of:
- Taxable Gifts taken on or after 28 February 1974
- Taxable Inheritances taken on or after 1 April 1975
In addition to CAT on gifts and on inheritances, the Finance Acts of 1984 and 1986 introduced a third tax element, a tax on Discretionary Trusts.
A Probate Tax was additionally introduced by the Finance Act 1993 but this tax lasted only a few years and was abolished by the Finance Act 2001.
The Capital Acquisitions Tax Consolidation Act 2003 (CATCA 2003) consolidated the various legislative provisions enacted over the years.
The 2010 Finance Act introduced a number of administrative changes in CAT including:
- introduction of a new pay and file regime;
- compulsory electronic filing of all CAT reliefs;
- introduction of surcharge for the late filing of CAT returns;
- abolition of secondary accountability and
- abolition of the 12-year charge on property
1.2 Gift and Inheritance Tax
1.2.1 What is a gift?
In general, where a person, the donee, becomes beneficially entitled in possession to any benefit for less than full consideration and there is no death involved he/she is deemed to take a gift.
1.2.2 What is an inheritance?
In general, where a person, the successor, becomes beneficially entitled in possession to any benefit for less than full consideration and it is taken on a death he/she is deemed to take an inheritance.
Tax is payable if the taxable value of gifts and inheritances exceed certain thresholds. The rate is then applied on the excess over the threshold amount.
1.2.3 Tax- free thresholds for Gift and Inheritance Tax
There are three tax-free thresholds depending on the relationship between the disponer and the beneficiary.
Group A threshold – Applies where the beneficiary is a child (including certain foster children) or minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an absolute inheritance from a child.
Group B threshold – Applies where the beneficiary is a brother, sister, niece, nephew, or lineal ancestor or lineal descendant of the disponer.
Group C threshold – Applies in all other cases.
(Note – Gifts and Inheritances taken by a Spouse or Civil Partner are exempt from Capital Acquisitions Tax).
Please use this link to access current and historic threshold amounts.
1.2.4 What property is liable to Gift and Inheritance Tax?
All property in the State is liable to gift/inheritance tax.
Assets outside of the State are subject to gift/inheritance tax if:
- The disponer or transferor is resident or ordinarily resident in the State at the date of the disposition or
- The beneficiary or recipient is resident or ordinarily resident in the State at the date of the gift or inheritance.
1.2.5 Exemptions and Reliefs for Gift and Inheritance Tax
- A gift or inheritance taken by a Spouse or Civil Partner is exempt from
- The first €3,000 of the total value of all gifts taken from any one disponer in a calendar year is exempt from CAT.
- An inheritance taken by a parent on the death of a child to whom either parent had previously made a non-exempt gift in the previous 5 years is exempt from CAT.
- A gift or inheritance for public or charitable purposes is exempt from
- An inheritance of a Dwelling House which was the principal private residence of the disponer at the date of his or her death and which was continuously occupied by the beneficiary as his or her only or main residence for three years immediately prior to the inheritance and which the beneficiary continues to occupy as his or her only or main residence for six years after the date of the inheritance is exempt from CAT. The beneficiary must not be entitled to any interest in any other residential premises at the date of the
- Gifts of dwelling houses to dependent relatives of a donor may also qualify for the A dependent relative is a direct relative of the donor, or of the donor’s spouse or civil partner, who is permanently and totally incapacitated because of physical or mental infirmity from maintaining himself or herself or who is over the age of 65. Where a gift of a dwelling house qualifies for the exemption, the dwelling house does not have to have been the principal private residence of the donor.
- A gift or inheritance of Heritage property is exempt from CAT provided certain conditions are met.
- Where a gift or inheritance consists of agricultural property, the market value of the agricultural property may be reduced by 90% provided certain conditions are met.
- Where a gift or inheritance consists of business property, the value of the business may be reduced by 90% provided certain conditions are met.
- Certain gifts and inheritances taken by a nephew or niece of the disponer are entitled to the Group A threshold.
- Where Capital Gains Tax (CGT) and Capital Acquisitions Tax (CAT) arise on the same property on the same event, the CGT can be credited against the CAT liability provided the property is not disposed of within 2 years of the event giving rise to the CAT and CGT.
- Where CAT is charged more than once on the same property on the same event, the tax which is earlier in priority is allowed as a credit against the tax which is later in priority.
1.2.6 Calculation of Gift and Inheritance tax
Any benefit received since 5 December 1991 from within the same group threshold is aggregated for the purposes of determining whether any tax is payable on the current benefit.
Current and historic rates of Capital Acquisitions Tax are available on the revenue website.
Note: The legislation provides that the relevant group thresholds, rates of tax, reliefs, etc. used to determine a beneficiary’s tax liability are those pertaining at the date of benefit and not the valuation date.
1.2.7 Administration of Gift and Inheritance Tax
A beneficiary is required to file a self-assessment return (Form I.T. 38) where benefits with a value of at least 80% of the tax-free threshold have been received by that beneficiary (section 46(4) CATCA 2003). This 80% threshold value is calculated by aggregating the value of the current benefits with the value of previous benefits received by a beneficiary since 5 December 2001. However, where a benefit comprises agricultural or business property and agricultural or business relief applies, a return must be filed regardless of the value of the agricultural or business property and its proportion of the particular group threshold.1
The Finance Act 2010 introduced a fixed pay and file date for CAT of 31 October. All gifts and inheritances with a Valuation Date in the 12 month period ending on the previous 31 August will be included in the return to be filed by 31 October of that year. The valuation date of a gift is the date of the gift and the valuation date of an inheritance is normally the date the administration of the estate has been completed.
The Finance Act 2011 brought forward the pay and file date to 30 September in respect of the year of assessment 2011.
The Finance Act 2012 amended the pay and file date for CAT from 30 September to 31 October. Therefore, all gifts and inheritances with a valuation date in the 12- month period ending on the previous 31 August will be included in the return to be filed by 31 October.
CAT returns must be filed through myAccount or ROS unless the following criteria apply:
- No relief/exemption/credit is claimed, apart from the small gift exemption;
- The benefit taken is an absolute interest without conditions or restrictions;
- The property included in the return was taken from only one disponer and is not part of a larger benefit or series of benefits taken by the beneficiary on the same day.
If the above criteria apply the return may be filed on the short form or through myAcount or ROS.
1 Requirement introduced by Finance Act 2020 (section 55), wef 19 December 2020.
In line with other taxes a surcharge is applied as a sanction for those who do not comply with the filing deadline. The surcharge is based on a percentage increase in the total tax payable for the year for which the return is late (subject to an overall cap).
- A 5% surcharge applies, subject to a maximum of €12,695, where the tax return is delivered within two months of the filing date (e.g., for the year of assessment 2016, any date between 1 November 2016 and 31 December
2016 inclusive).
- A 10% surcharge, up to a maximum of €63,485, will be applied where the tax return is not delivered within two months of the filing date.
Interest also arises for late payments.
Taxpayers can file a return with payment or pay separately and while it is recommended that payments be made through myAccount or ROS, payment can also be made through the post by cheque.
Payment of tax may be facilitated by the use of certain policies of insurance, the proceeds of which are exempt from CAT provided they are used to pay the tax liability.
IT39 – Guide to completing the IT38 return (Pay and File)
1.3 Discretionary Trust Tax
The term Discretionary Trust is generally applied to a trust under which trustees have absolute discretion to apply the income and or the capital of the trust property in favour of a particular person or persons, who are named as objects of the trust.
The object of the trust has no interest in possession in the trust property; he or she has merely a hope that the trustees may exercise their discretion in his or her favour.
There is a once-off charge to discretionary trust tax at the rate of 6% on the latest of the following dates:
- The date on which the property becomes subject to the trust
- The date of death of the settlor
- The date on which there are no principal beneficiaries of the trust aged less than 21 years. (The principal beneficiaries are the spouse, the children and the children of a predeceased child of the settlor
The 6% once-off charge is reduced to 3% if the property is transferred absolutely out of the trust within 5 years.
An annual charge at the rate of 1% also arises on 31 December each year on the property in the trust.
7.1 Introduction
A gift or inheritance may comprise a limited interest in property. For CAT purposes, this manual provides guidance on the meaning of the term “limited interest”, the rules for calculating the value of a limited interest and the treatment that applies where a limited interest is terminated.
7.2 Meaning of a limited Interest
The term “limited interest” is defined in section 2 of the Capital Acquisitions Tax Consolidation Act 2003 (CATCA 2003) and means:
- an interest (other than a leasehold interest) for the duration of a life (or lives) or for a period certain;
- any other interest which is not an absolute interest.
Accordingly, for CAT purposes, a person takes a limited interest in relation to property where the person receives less than an absolute interest in that property. A limited interest may take the form of an exclusive interest in an asset for a defined period (e.g. for 10 years) or for the duration of a life (e.g. a life tenant).
7.3 Rules for calculating the value of a limited interest
The value of a limited interest for CAT purposes is calculated by reducing the incumbrance free value of the benefit (i.e. market value less costs, liabilities and expenses) in accordance with the rules and tables in Schedule 1 CATCA 2003 (section 28(4) CATCA 2003). There are three parts to Schedule 1:
- Part 1, containing seven specific rules and one general rule for calculating the value of a limited interest using Table A in Part 2 and Table B in Part 3.
- Part 2, containing Table A, which applies where an interest taken is for the duration of a life (or lives). It provides the appropriate factors to be applied by reference to the age and gender of the beneficiary.
- Part 3, containing Table B, which applies where the interest taken is for a definite period.
Tables A and B are reproduced in Appendices 1 and 2.
Guidance on how to apply the specific rules in Part 1 is set out in paragraphs 7.3.1 to 7.3.7.
Where the value of a limited interest is not covered by the specific rules in Part 1, the general rule in Part 1 applies. The general rule provides that the value is to be ascertained as if the interest taken were a series of absolute interests in the property applied in satisfaction of the interest from time to time, taken as separate
gifts/inheritances. Such a situation could arise where the value of an interest can only be determined each year, e.g. where an annuity will be paid to a beneficiary each year to bring the net income of that beneficiary up to a certain amount. In such a situation, each annual payment would be treated as a separate gift or inheritance.
7.3.1 Life Interest – single life
The value of an interest for a single life in a capital sum is that sum multiplied by the factor, in column 3 (if male) or 4 (if female) of Table A (interest taken is for the duration of a life which is appropriate to the age and gender of the person for the duration of whose life the interest is to be valued.
Example 1
David is aged 50 and inherits a life interest in a house from his sister Niamh. The house is valued at €500,000 at the valuation date. The taxable value of David’s inheritance is calculated as follows:
Market Value | €500,000 |
Multiply by appropriate age factor | 0.7287 |
David’s taxable value is | €364,350 |
If David pays any consideration for the benefit this would be deductible from the taxable value of €364,350.
On David’s death, the house is to pass to Niamh’s nephew Karl absolutely. Karl will take an inheritance from Niamh based on the valuation at date of death of David.
7.3.2 Life Interest – joint continuance of 2 lives (shorter of 2 lives)
The value of an interest in a capital sum for the joint continuance of 2 lives is the value of an interest in that sum for the older life, based on the relevant factor in Table A, multiplied by the joint factor in Column 2 of Table A that is appropriate to the age of the younger life.
Example 2
Gary settles €300,000 on trustees to pay the income to his sister, Ciara, for her life or until Gary’s death, whichever occurs first. Gary is aged 60 and Ciara is aged 63 at the date of the gift. The taxable value is calculated as follows:
Market Value €300,000
Multiply by factor for the older
life (0.6000) X by joint factor for the younger life (0.86)
€154,800
Ciara’s taxable value is €154,800
7.3.3 Life Interest – joint continuance of 3 or more lives (shortest of 3 or more lives)
The value of an interest in a capital sum for the joint continuance of three or more lives is the value of an interest in that sum for the joint continuance of the two oldest of those lives, multiplied by the joint factor in Column 2 of Table A that is appropriate to the age of the youngest of those lives.
Example 3(a)
Gary settles €300,000 on trustees to pay the income to his sister Ciara for her life or his sister Helen’s life, or Gary’s life, whichever is the shortest. Gary is aged 60, Ciara is aged 63 and Helen is aged 55 at the date of the gift. The taxable value is calculated as follows:
- Value for the joint continuance of the 2 oldest lives
Market Value | €300,000 |
Multiply by factor for the oldest | |
life (0.6000) X by joint factor for the | |
second oldest life (0.86) | €154,800 |
- Multiply €154,800 by joint factor
for the youngest life (0.88) €136,224 Ciara’s taxable value is €136,224
Example 3(b)
If Gary, Ciara and Helen received a gift of property valued at €300,000 for the joint continuance of their lives the calculation is as for 3(a) but each would have a taxable value of €45,408 (€136,224 x 1/3).
7.3.4 Life Interest – longer of 2 lives
The value of an interest in a capital sum for the longer of 2 lives is the total value of each life interest calculated separately, less the value of an interest for the joint continuance of the 2 lives.
Example 4
Gary settles €300,000 on trustees to pay the income to his sister, Ciara for her life or Gary’s life, whichever is the longer. Gary is aged 60 and Ciara is aged 63 at the date of the gift. The taxable value is:
€300,000 x 0.6000 (the factor for Ciara aged 63) €180,000
€300,000 x 0.5809 (the factor for Gary aged 60) €174,270
€354,270
Less value for joint continuance of 2 lives (Example 2) €154,800 Value of interest in €300,000 for the longer of 2 lives €199,470 Ciara’s taxable value is €199,470
7.3.5 Life Interest – longest of 3 or more lives
The value of an interest in a capital sum for the longest of 3 or more lives is the value for the longer of the 2 youngest lives.
Example 5
Gary settles €300,000 on trustees to pay the income to his sister, Ciara for her life or his sister Helen’s life or Gary’s life, whichever is the longest. Gary is aged 60, Ciara is aged 63 and Helen is aged 55 at the date of the gift. The taxable value of the gift is:
€300,000 x 0.5809 (the factor for Gary aged 60) €174,270
€300,000 x 0.7206 (the factor for Helen aged 55) €216,180
€390,450
Less value for the joint continuance of the 2 younger lives
300,000 x 0.5809 (factor for Gary) x 0.88 (joint factor for Helen) €153,358 Value of interest in €300,000 for the longest of 3 lives €237,092 Ciara’s taxable value is €237,092
7.3.6 Interest for a period certain
Where the interest taken is for a fixed period, the figures in Schedule 1 Table B provide the value of an interest in capital of €1 for the number of years. The capital sum is multiplied by the factor appropriate to the number of whole years to get the value of the interest.
If the fixed period includes part of a year, the calculation is based on the value for the number of whole years plus a fraction (number of days in excess of the number of whole years/365) of the difference between the value of an interest in the capital sum for one year longer than the number of whole years in the period and the value for the number of whole years, or zero if that period is less than 1 year
Example 6
Emily takes an interest in a property valued at €400,000 for four years and six months. The taxable value is calculated as follows:
Value for 5 years €400,000 x 0.2869 | €114,760 |
Value for 4 years €400,000 X 0.2370 | €94,800 |
Difference | €19,960 |
Value for 6 months €19,960 x 182.5/365 | €9,980 |
Emily’s taxable value is (€94,800 + €9,980) | €104,780 |
7.3.7 Life interest guaranteed for a fixed period
Where the interest is for life but guaranteed for a minimum period, the value is the higher of (a) the value of the life interest or (b) the value of the interest for the guaranteed period.
Example 7
Gary (aged 60) receives a pension of €25,000 per annum for his life. The pension is guaranteed for 10 years. Assume the capital value is €350,000. The taxable value is calculated as the higher of:
- €350,000 X 5809 (male aged 60) = €203,315 or
- €350,000 X 4913 (10 years certain) = €171,955
As the value of the life interest is higher Gary has a taxable value of €203,315.
If Gary was aged 70, the value of the life interest would be €350,000 X 0.4173 =
€146,055. In this case as the value for 10 years is higher the taxable value would be
€171,955.
7.4 Termination of limited interests
General Rules around the termination of limited interests:
- A remainderman’s benefit will not be taxed until it becomes an interest in
- A life-tenant is deemed to die immediately before the release of his or her life interest to the remainderman.
- Deemed death of the life tenant applies only to the inheritance tax claim from the settlor.
- Two claims for tax arise on the release by the life-tenant of the life interest to the remainderman or on the transfer of the remainder interest by the remainderman to the life-tenant i.e. one claim for inheritance tax and one claim for gift tax. A credit is allowed for the inheritance tax against the gift
7.5 Early Termination of Limited Interests
Section 33 CATCA 2003 deals with the termination of limited interests, such as a life interest, before the time when such interests are limited to cease. Where a limited interest comes to an end before the event on which it is limited to cease occurs, such as before the death of a life tenant in a life interest, tax is payable as if the event had occurred.
Common examples of early termination of limited interests are:
- where a life tenant acquires the remainder interest
- where the remainderman acquires the preceding life interest
- where the parties to a settlement agree to terminate the Trust by dividing the trust funds between them.
7.5.1 Life interest ends prematurely
John settles property for life on his wife Marie with remainder to his brother George. During Marie’s lifetime she transfers her life interest to George thus ending her life interest and enlarging George’s interest into an absolute interest or, alternatively, George transfers his remainder interest to Marie thus ending his remainder interest and enlarging Marie’s interest into an absolute interest.
Whether the transfer is from Marie to George or from George to Marie, the effect of the break-up of the settlement is that inheritance tax is payable on the basis that George inherits the full value of the property from John. The life tenant Marie is deemed to die immediately prior to the transfer. Thus, the inheritance tax claim that would have arisen on the death of Marie on the coming to an end of her life interest
if the settlement had run its intended course is accelerated to the earlier date on which Marie’s life interest actually has come to an end.
Therefore, the primary inheritance tax liability under the original settlement or will is always maintained in all respects as if the life tenant had died immediately prior to the break-up of the trust.
7.5.2 Consideration paid for the advance ending of a life interest
John, in 2010, transfers his shop worth €500,000 to his wife Marie for her lifetime with remainder to his brother George. In 2017, the value of the property is €800,000 and Marie’s life interest is valued at €180,000. Marie, in 2017, transfers her life interest to George in consideration of George paying her €100,000.
George is now full owner of the shop and under section 33 of the CATCA 2003 he is liable to inheritance tax on the full market value of the shop taken by him from John. However, while George must pay tax on an inheritance of €800,000, he has paid
€100,000 consideration to Marie.
The €100,000 paid by George to Marie is not allowable as consideration against the value of George’s inheritance from John. It is allowable only as consideration against the value of the gift from Marie to George.
Likewise, if George, in 2017 transferred his remainder interest valued at €620,000 to Marie in consideration of Marie paying him €500,000, inheritance tax is payable on the basis that George inherits the full value of the property from John. Under section 33 CATCA 2003 Marie is liable for the tax as transferee from George. The payment of
€500,000 made by Marie to George is not allowable as a deduction against the taxable value of the inheritance. The €500,000 paid by Marie to George is allowable as consideration against the value of the gift from George to Marie.
Thus, consideration paid by a life tenant to a remainderman or vice versa for a release of his or her interest to the other is not allowed as a deduction against the market value of the property in respect of the primary inheritance tax claim. Such consideration is allowed only against the value of the secondary gift tax claims arising, if any.
Inheritance tax arises on the full market value of the property, in all respects, as if the life tenant had died, and the property had passed to the remainder man.
In this type of settlement break-up, two claims for CAT, i.e. inheritance tax and gift tax can therefore arise on the same property on the same event. Under section 105 CATCA 2003 a credit is allowed for the inheritance tax, which is the first claim against the gift tax, which is the second claim.
7.5.3 Actuarial division
A life tenant and a remainderman may choose to divide a trust fund between them on an actuarial basis. This usually arises where it is in the interest of all parties to
acquire liquid funds. However, the actuarial division again does not eliminate the primary inheritance tax liability arising under the original settlement. However, on an actuarial division between the life tenant and the remainderman, no separate gift tax claim would arise.
Michael settles property on trust for John for life with remainder to Patrick. The trust fund is worth €500,000. The value of John’s life interest is worth €100,000 and the value of Patrick’s remainder interest is worth €400,000.
If the property is sold and the proceeds divided up as €100,000 to John and €400,000 to Patrick, neither John nor Patrick has received a benefit from the other and therefore no gift tax claims arise between John and Patrick.
However, on the break-up of the trust, the primary inheritance tax liability under the original settlement or will is maintained under section 33 CATCA 2003. The full value of the trust fund deemed to have been inherited by Patrick from Michael is charged to Inheritance Tax. The Inheritance Tax claim that would have arisen on the death of John is accelerated to the earlier date of when John’s life interest in the trust fund has actually come to an end, which is the date on which the property has been sold, and the date on which the sale proceeds have been divided up between John and Patrick.
7.6 Consideration Paid for Future Interests in Property
If a person makes a payment for the granting to him or her of an interest in property, which is not to take effect until a future date when he or she will eventually come into possession of the property, such consideration is dealt with in as set out below.
In 2010 Liam makes a payment of €100,000 to Michael in consideration of Michael executing a deed under which Michael’s public house will become the property of Liam on the death of Michael. At the date of the deed in 2010 the public house is valued at €500,000. Eight years later in 2018 Michael dies and the value of the public house at Michael’s death is €1,000,000.
Section 28(10) CATCA 2003 provides a formula for calculation of the deductible consideration. The formula is:
Encumbrance-free value at date of falling into possession x Consideration paid
market value of expectant interest at date of payment
On the basis that the market value of Liam’s expectant interest at date of payment was say €200,000 the deductible consideration would be as follows:
€1,000,000 x €100,000 = €500,000
€200,000
The taxable value of Liam’s inheritance is €1,000,000 minus €500,000, i.e. €500,000.
Appendix 1
TABLE A (CATCA 2003 Sch 1 PART 2)
Years of age (1) | Joint Factor (2) | Value of an interest in a capital of €1 for a male life aged as in column 1
(3) |
Value of an interest in a capital of €1 for a female life aged as in column 1
(4) |
Years of age (1) | Joint Factor (2) | Value of an interest in a capital of €1 for a male life aged as in column 1
(3) |
Value of an interest in a capital of €1 for a female life aged as in column 1
(4) |
0 | .99 | .9519 | .9624 | 21 | .97 | .9416 | .9547 |
1 | .99 | .9767 | .9817 | 22 | .97 | .9387 | .9521 |
2 | .99 | .9767 | .9819 | 23 | .97 | .9356 | .9493 |
3 | .99 | .9762 | .9817 | 24 | .97 | .9323 | .9464 |
4 | .99 | .9753 | .9811 | 25 | .97 | .9288 | .9432 |
5 | .99 | .9742 | .9805 | 26 | .97 | .9250 | .9399 |
6 | .99 | .9730 | .9797 | 27 | .97 | .9209 | .9364 |
7 | .99 | .9717 | .9787 | 28 | .97 | .9165 | .9328 |
8 | .99 | .9703 | .9777 | 29 | .97 | .9119 | .9289 |
9 | .99 | .9688 | .9765 | 30 | .96 | .9068 | .9248 |
10 | .99 | .9671 | .9753 | 31 | .96 | .9015 | .9205 |
11 | .98 | .9653 | .9740 | 32 | .96 | .8958 | .9159 |
12 | .98 | .9634 | .9726 | 33 | .96 | .8899 | .9111 |
13 | .98 | .9614 | .9710 | 34 | .96 | .8836 | .9059 |
14 | .98 | .9592 | .9693 | 35 | .96 | .8770 | .9005 |
15 | .98 | .9569 | .9676 | 36 | .96 | .8699 | .8947 |
16 | .98 | .9546 | .9657 | 37 | .96 | .8626 | .8886 |
17 | .98 | .9522 | .9638 | 38 | .95 | .8549 | .8821 |
18 | .98 | .9497 | .9617 | 39 | .95 | .8469 | .8753 |
19 | .98 | .9471 | .9596 | 40 | .95 | .8384 | .8683 |
20 | .97 | .9444 | .9572 | 41 | .95 | .8296 | .8610 |
Years of age (1) | Joint Factor (2) | Value of an interest in a capital of €1 for a male life aged as in column 1
(3) |
Value of an interest in a capital of €1 for a female life aged as in column 1
(4) |
Years of age (1) | Joint Factor (2) | Value of an interest in a capital of €1 for a male life aged as in column 1
(3) |
Value of an interest in a capital of €1 for a female life aged as in column 1
(4) |
42 | .95 | .8204 | .8534 | 66 | .85 | .4841 | .5462 |
43 | .95 | .8107 | .8454 | 67 | .84 | .4673 | .5266 |
44 | .94 | .8005 | .8370 | 68 | .84 | .4506 | .5070 |
45 | .94 | .7897 | .8283 | 69 | .84 | .4339 | .4873 |
46 | .94 | .7783 | .8192 | 70 | .83 | .4173 | .4679 |
47 | .94 | .7663 | .8096 | 71 | .83 | .4009 | .4488 |
48 | .93 | .7541 | .7997 | 72 | .82 | .3846 | .4301 |
49 | .93 | .7415 | .7896 | 73 | .82 | .3683 | .4114 |
50 | .92 | .7287 | .7791 | 74 | .81 | .3519 | .3928 |
51 | .91 | .7156 | .7683 | 75 | .80 | .3352 | .3743 |
52 | .90 | .7024 | .7572 | 76 | .79 | .3181 | .3559 |
53 | .89 | .6887 | .7456 | 77 | .78 | .3009 | .3377 |
54 | .89 | .6745 | .7335 | 78 | .76 | .2838 | .3198 |
55 | .88 | .6598 | .7206 | 79 | .74 | .2671 | .3023 |
56 | .88 | .6445 | .7069 | 80 | .72 | .2509 | .2855 |
57 | .88 | .6288 | .6926 | 81 | .71 | .2353 | .2693 |
58 | .87 | .6129 | .6778 | 82 | .70 | .2203 | .2538 |
59 | .86 | .5969 | .6628 | 83 | .69 | .2057 | .2387 |
60 | .86 | .5809 | .6475 | 84 | .68 | .1916 | .2242 |
61 | .85 | .5650 | .6320 | 85 | .67 | .1783 | .2104 |
62 | .85 | .5492 | .6162 | 86 | .66 | .1657 | .1973 |
63 | .85 | .5332 | .6000 | 87 | .65 | .1537 | .1849 |
64 | .85 | .5171 | .5830 | 88 | .64 | .1423 | .1730 |
65 | .85 | .5007 | .5650 | 89 | .62 | .1315 | .1616 |
Years of age (1) | Joint Factor (2) | Value of an interest in a capital of €1 for a male life aged as in column 1
(3) |
Value of an interest in a capital of €1 for a female life aged as in column 1
(4) |
Years of age (1) | Joint Factor (2) | Value of an interest in a capital of €1 for a male life aged as in column 1
(3) |
Value of an interest in a capital of €1 for a female life aged as in column 1
(4) |
90 | .60 | .1212 | .1509 | 96 | .49 | .0710 | .0972 |
91 | .58 | .1116 | .1407 | 97 | .48 | .0642 | .0898 |
92 | .56 | .1025 | .1310 | 98 | .47 | .0578 | .0828 |
93 | .54 | .0939 | .1218 | 99 | .45 | .0517 | .0762 |
94 |
.52 |
.0858 |
.1132 |
100 or over |
.43 |
.0458 |
.0698 |
95 | .50 | .0781 | .1050 |
Appendix 2
TABLE B (CATCA 2003 Sch 1 PART 3)
(Column (2) shows the value of an interest in a capital of €1 for the number of years shown in column (1))
Number of years (1) | Value (2) | Number of years (1) | Value (2) |
1 | .0654 | 21 | .7574 |
2 | .1265 | 22 | .7731 |
3 | .1836 | 23 | .7878 |
4 | .2370 | 24 | .8015 |
5 | .2869 | 25 | .8144 |
6 | .3335 | 26 | .8263 |
7 | .3770 | 27 | .8375 |
8 | .4177 | 28 | .8480 |
9 | .4557 | 29 | .8578 |
10 | .4913 | 30 | .8669 |
11 | .5245 | 31 | .8754 |
12 | .5555 | 32 | .8834 |
13 | .5845 | 33 | .8908 |
14 | .6116 | 34 | .8978 |
15 | .6369 | 35 | .9043 |
16 | .6605 | 36 | .9100 |
17 | .6826 | 37 | .9165 |
18 | .7032 | 38 | .9230 |
19 | .7225 | 39 | .9295 |
20 | .7405 | 40 | .9360 |
Number of years (1) | Value (2) | Number of years (1) | Value (2) |
41 | .9425 | 46 | .9750 |
42 | .9490 | 47 | .9815 |
43 | .9555 | 48 | .9880 |
44 | .9620 | 49 | .9945 |
45 | .9685 | 50 and over | 1.0000 |