CAT Exemptions

Spousal Exemption

There is a complete exemption for gifts or inheritances between spouses and civil partners.  This has not always existed.  When the CAT was first introduced, spouses were in the equivalent of Group A.

As of 30th January 1985, all inheritances became exempted.  As of 31st January 1990, all gifts became exempted.

Transfers between former spouses after divorce, pursuant to divorce orders, are subject to a separate specific exemption.  The exemptions are limited to orders of transfer in judicial separation or divorce.

Annual €3,000 Exemption

There is an annual exemption of €3,000 for gifts taken by any recipient from any disponer in any year. This small gift exemption applies only to gifts and not to inheritances. It applies to and in each calendar year.

A recipient may take a gift from several donors in the same calendar year, and the first €3,000 from each disponer is exempt from CAT.  Gifts within this limit are not taken into account in computing tax and are not included for aggregation purposes.

The relief is available as a deduction where the amount of the gift exceeds €3,000.  Therefore, if €6,000 is given, the first €3,000 is deducted. The exemption is per disponer.

Maintenance and Support

There is an exemption in respect of normal and reasonable payments made by an individual for the support, maintenance and education of his children and certain dependant relatives. The exemption applies to the receipt of money or the equivalent by a child and a person in relation to whom the provider of the benefit stands in loco parents.

The benefits must be normal expenditure of a person in the circumstances of the disponer and reasonable having regard to his financial circumstances. The test in relation to what is normal and reasonable is determined by the circumstances of the disponer.

The exemption applies to children without any age restriction. An amendment was intended to ensure that the exemption is confined to payments made to minor children and to children under the age of 25 years who are in full-time education.

The exemption also covers dependant relatives of persons with a total annual income less than the maximum annual old age social welfare pension for a single person who is maintained at the disponer’s expense.  The person must be a relative who is incapacitated by old age or infirmity from maintaining himself, a widowed mother or father of the disponer or a spouse, or a child of the disponer who lives with the disponer, and on whose service the disponer depends because of old age or incapacity.

Orphaned Child

Receipts by a minor child provided by a diseased parent for his maintenance and education at a time when both parents are dead are exempted by the provisions for support and maintenance. They will be part of the normal expenditure of a person in the circumstances and is reasonable, having regard to the financial circumstances of the disponer immediately prior to death.

There is an exemption for normal and reasonable payments made to an orphaned minor child or to an orphaned minor child of a civil partner for support, maintenance or education, after the death of their parents, from a trust set up by the parents during their lifetime. The amended provision extends the exemption to orphaned children up to the age of 25 years who are in full-time education and ensures that children of living parents and orphaned children are treated equally for Capital Acquisitions Tax purposes.

Incapacitated Persons

There is an exemption for certain incapacitated persons.  A qualifying trust must meet certain conditions.

It must be established for the benefit of one or more incapacitated persons for whose benefit public subscriptions have been raised.  The trust funds must be applied for the benefit of that individual, and in the event of that individual’s death, the undistributed parts must be applied for charitable purposes, and none of the trustees must be connected with the individuals.

Gifts or inheritances taken to discharge qualifying expenses of a permanently incapacitated individual are exempt.  Qualifying expenses are those relating to medical care, including the cost of maintenance in connection with the care.  The Revenue must be satisfied that the benefit is applied for such purpose.

Cultural Objects

There is an exemption for gifts or inheritances of objects of national, scientific, historic or artistic interest.  The exemption is subject to conditions.  A claim must be made to Revenue.

The objects concerned must be kept in the  State except for temporary approved absences.  Reasonable facilities for viewing must be available to members of the public or recognized bodies and associations. The reasonable facilities must be specified in the application.

The exemption is not available for objects used for the purpose of a business.

If the items are sold within six years, within, and before the date of the benefit, the exemption will cease.  There are exemptions for sales to the National Gallery, Commission of Public Works, universities, local authorities and certain other bodies.

There are ongoing conditions for the exemption.  The exemption ceases if, at any time before a certain specified event, there is a breach of any of the conditions.  There is no time limit applying to this clawback. If the exemption ceases to apply, the tax is reassessed.

Certain Houses & Gardens

The exemption also applies to certain houses and gardens.  They must be situated in the State, not used for a business, and it must be shown to the Revenue on application that the house or garden is of national, scientific, historic or artistic interest.

Reasonable facilities for viewing must be allowed to the public for a period of three years prior to the gift or inheritance.  This is different to the position in relation to objects. The exemption does not apply if the property is sold within six years other than to the above-mentioned specific bodies.

Reasonable facilities must be allowed to the members of the public for viewing after the gift or inheritance as well as before it.  There is no time limit on the condition.

There are certain published conditions in relation to what constitutes reasonable viewing facilities.  Essentially, the house or gardens must be open to the public for at least 60 days, including 40 days between May and October, of which not less than 10 of the days must be on a Saturday or Sunday or both.

The premises must be open for at least four hours.  Access to the whole or a substantial part of the house or garden is required.  The price paid if only for access, is to be reasonable in amount. Other prescribed conditions apply.

Heritage Property & Shares

There is exemption for a gift of inheritance which consists of shares in a private company which, at the date of the inheritance and the valuation day, derives its market value from relevant heritage properties.  The heritage property must be owned by the company or by a subsidiary which held heritage property as of 1995.

Where the condition applies, the shares are exempted from CAT to the extent that their value derives from heritage properties.  There is a provision for clawback and relief if the shares are sold within six years.

The relief is also lost if the heritage property is sold by the company within six years.  Furthermore, if at any time there is a breach of the condition, the exemption is withdrawn.

Clawback

The Finance Act 2012 provided for a clawback of the exemption from CAT granted in respect of certain heritage objects where they are sold within six years of the valuation date. The clawback does not apply, however, where the relevant objects are sold by private treaty to certain State institutions.

The amendment adds cultural institutions funded by grants or grant-in-aid or funded directly by the Department of Arts, Heritage and the Gaeltacht to the list of bodies mentioned.

Gifts & Deceased Child

There is an exemption where a parent takes an inheritance from a child on that child’s death if that child had taken a gift or inheritance from one or both parents within the preceding five years. The latter gift must have been taxable so that exempt gifts are not covered.

An exempt gift would exclude payments for support and maintenance as well as gifts below the €3,000 threshold.  There is no requirement that the two gifts or inheritances be equal.

Charities

A gift or inheritance taken for public or charitable purposes is exempt.  It is not taken into account for the purpose of calculation of the tax.

A charitable gift is one for charitable or public purposes.  See the chapters on charities and charitable purposes.

Public purposes are wider than charitable purposes. Charitable purposes themselves encompass the benefit of the public or a class of the public.  However,  non-charitable public purpose gifts may also be exempted.

Government Security Instruments

Generally, Irish-situated assets are taxed in Ireland irrespective of the residence or domicile of the disponer or recipient. Certain government-issued securities are exempt.  Conditions apply. The exemption applies to debt securities, shares or their equivalent.

The relevant legislation exempts the recipient if the beneficial owner is a person who is neither domiciled nor ordinarily resident in the state.

There is a condition that the security or units are held for a period of 15 years before the gift or inheritance and that the recipient is neither domiciled nor ordinarily resident in the state.  Formerly shorter periods apply.

If the disponer is neither domiciled nor ordinarily resident in the state at the time of the disposition, the 15-year rule does not apply.

Where a person receives an annuity which is not charged on a specific property, it is deemed to be charged on a specified government security which would yield this return.

Compensation

There is an exemption for compensation and damages for injuries and wrongs.  It applies to injury to a person’s property, reputation or bodily injury.

Prizes

There is an exemption for bona fide winnings from betting, lottery sweepstakes and games and prizes.  The exemption is only available to bona fide winnings.

Bankruptcy

There are exemptions on contributions towards a composition or arrangement by a person in or subject to bankruptcy, where contributions are made by friends or relatives of the debtor to enable a composition to be made.  There is an exemption in relation to the payment itself and any remission of debts by the creditor.

Certain Insurance Policies

Certain insurance policies issued by financial services companies are deemed exempt from CAT.  Otherwise, they would be taxable in the hands of third parties with no other connection to Ireland.  An interest in such a policy is exempt provided the interest, the disponer and the donees are neither domiciled or ordinarily resident in the state.

Not Deemed Disposition

A gift or inheritance cannot arise where the benefit is provided by the recipient.

Companies other than public companies are looked through for the purpose of Inheritance and Gift Tax. A disposition made by a private company or received by a private company is deemed to be made or taken respectively by the shareholders in the company.