CAT Exemptions
Revenue Manual
14.1 Introduction
In general terms, all gifts and inheritances are chargeable to capital acquisitions tax (CAT) unless a specific exemption is applicable which would remove the gift or inheritance from that charge. A disponer may wish to minimise the exposure of a beneficiary to a charge to CAT by making the gift or the inheritance ‘free of tax’.
Section 87 CATCA 2003 provides that where a disponer directs that a gift or an inheritance is to be taken by a beneficiary ‘free of tax’, the benefit taken is deemed to include the amount of CAT on the gift or inheritance but does not include further CAT on the additional CAT that would otherwise have been payable. In effect, the benefit taken by the beneficiary is increased by including the tax on the gift or inheritance as an additional benefit.
For the purposes of calculating the CAT due, the beneficiary is regarded as taking two benefits; i.e. the amount of the gift or inheritance itself and the tax payable in respect of that gift or inheritance.
14.2 Example
James inherits €75,000 from a friend ‘free of tax’ in July 2021. He has taken no prior gifts or inheritances in Group C and therefore the full tax-free threshold of €16,250 is available to him.
The first step is to calculate the amount of tax due on the inheritance. The tax on
€75,000 is €19,387.50; i.e. 33% of €58,750 (€75,000 less Group C tax-free threshold of €16,250).
Using the tax on the inheritance, the second step is to calculate the taxable value of the benefit taken by James. The taxable value is €94,387.50; i.e. €75,000 inheritance plus €19,387.50 tax-free benefit.
The final step is to calculate the tax due. This is done by deducting the Group C tax- free threshold amount from the taxable value of the benefit and applying the current CAT rate of 33% on the excess. The tax on the benefit of €94,387.50 is
€25,785.37; i.e. 33% of €78,137.50 (€94,387.50 less group C tax-free threshold of
€16,250).
The tax due of €25,785.37 is payable out of the residue of the disponer’s estate.
The information in this document is provided as a guide only and is not professional advice, including legal advice. It should not be assumed that the guidance is comprehensive or that it provides a definitive answer in every case.
Introduction
Section 84 exempts gifts or inheritances taken exclusively for the purposes of discharging certain medical and related expenses of an individual who is permanently incapacitated by reason of physical or mental infirmity. Such a gift or inheritance is not taken into account in computing a CAT liability.
22.1 Qualifying conditions for the relief
The gift or inheritance must be taken by a person who is permanently incapacitated by reason of physical or mental infirmity.
The gift or inheritance must be given exclusively for the purpose of discharging qualifying expenses of the incapacitated person. In this regard it is the intention of the disponer providing the gift or inheritance that determines the availability of the exemption. In the absence of such an intention, it is not relevant that a beneficiary might decide, after receiving a gift or inheritance, to use it to discharge medical expenses.
The use of the gift or inheritance for any purpose other than the discharge of qualifying medical expenses does not qualify for the exemption. The exemption may be withdrawn where Revenue is not satisfied that the gift or inheritance was applied, or will be applied, in discharging qualifying expenses. It is not necessary that the entire gift or inheritance be used for this purpose, but any part used for any other purpose does not qualify for the exemption.
Qualifying expenses are those that relate to medical care including the cost of maintenance in connection with such medical care.
22.1.1 Appeal Commissioner’s determination
An Appeal Commissioner made a determination on 18 June 2019 (32TACD2019) in which he took a different view than Revenue in relation to the requirement for the gift or inheritance to be taken exclusively for the purpose of discharging qualifying expenses of the incapacitated person. He determined that it was not the intention of the disponer (as argued by Revenue) in providing the gift or inheritance that determines the availability of the exemption. While Revenue did not appeal this determination to the High Court, this is not to be interpreted as agreement with the determination on Revenue’s part. Revenue’s position remains as set out in this TDM. An Appeal Commissioner’s determination does not create a precedent in relation to the operation of tax law and does not preclude Revenue from refusing the exemption in other cases and from arguing its case before the Appeal Commissioners where the refusal of the exemption is appealed by the taxpayer.
22.2 Examples
Example 1
David has cerebral palsy. His father died in 2010, leaving a provision in his will that a trust be established to provide for David’s ongoing medical care for the remainder of his life. The trust funds have been utilised exclusively since that time to cover David’s’ hospital charges, doctors’ fees and medicines. As these are ‘qualifying expenses’, the exemption applies in relation to the inheritance.
Example 2
Laura was born totally deaf. Her uncle left her a lump sum in his will to which he assigned no particular purpose or conditions. Laura went on to spend the money on cochlear implant treatment. As there is no evidence that her uncle intended, either by will or otherwise, to provide the benefit exclusively for Laura’s medical and related expenses, this inheritance does not qualify for the exemption.
Example 3
Eileen is elderly and has been diagnosed with dementia. On the advice of her doctors she now requires the round-the-clock care that can be provided by a nursing home. Her four children have agreed in writing that they will each contribute to the costs of their mother’s nursing home care. These gifts qualify for the exemption.
Example 4
Brendan lost his leg in a motorcycle accident. His mother left him a legacy in her will to specifically support his recovery from the accident. While the majority of the benefit was spent on rehabilitation expenses such as physiotherapy, prosthesis costs and counselling, Brendan also used some of the legacy for a deposit on an apartment. The exemption applies only to the medical and related expenses. The benefit used for the apartment deposit is a taxable inheritance and may result in a tax liability depending on any previous gifts and inheritances received by Brendan under the Group A threshold.
Example 5
Eoghan was diagnosed with multiple sclerosis a number of years ago and requires ongoing medical care. His father died intestate last year and, as his sole beneficiary, Eoghan inherited the total of his father’s estate. While Eoghan has used some of his inheritance to cover medical expenses and related expenses associated with his condition these will not qualify for the exemption as there is no evidence that his father intended, by will or otherwise, to provide the benefit of his estate exclusively for this purpose.
19.1 Claims for wages etc.
There is a presumption against contractual relations within the family. See Jones v Padavatton (1961 1 W.L.R. 328) and Balfour v Balfour (1919 2 K.B. 571). Claims by relatives against the estate of a deceased person for wages (e.g. for nursing and maintaining the deceased or for taking over the responsibility of working the deceased’s farm) or for the granting of accommodation to the deceased should generally be disallowed because, in the nature of things, they tend not to be accompanied by evidence of legally enforceable contracts.
19.2 Advances out of residue
Where different parts of the residue of the estate of a deceased person are retained successively in the form of advances to the residuary legatee by the deceased’s personal representative-
(a) each advance and the final distribution have (as indicated in section 30(5) CATCA 2003) a separate valuation date for inheritance tax purposes,
(b) the inheritance tax on the residuary estate (a single inheritance) is apportioned between the different parts in exactly the same way as inheritance tax is apportioned when on a death a number of simultaneous inheritances with different valuation dates are taken by the same beneficiary, and
(c) interest on the respective apportionments of tax is calculated from the respective valuation dates.
19.3 The State as ultimate intestate successor
Where, in default of any person taking the estate of a disponer who dies intestate, the State takes the estate as ultimate intestate successor, a person in whose favour the State’s rights are waived is regarded as having taken an inheritance directly from the intestate disponer and not as having taken a gift from the State.
19.4 Deduction of CGT for CAT purposes
Where a house is transferred charged with a mortgage or subject to payment of partial consideration, the entire CGT amount attributable to the disposal (being a disposal of the whole house) is deductible from the entire CAT amount attributable to the disposition (being a disposition of the whole house).
19.5 Arrears of income tax etc. due to HMRC (reciprocal arrangement)
Arrears of income tax, CGT, etc. due to HMRC by a person domiciled in this country are allowed as a debt for CAT purposes, provided that the tax was actually paid and whether the deceased person died possessed of assets in the United Kingdom.
19.6 Exemption for charities
A gift or an inheritance which is taken for public or charitable purposes is exempt from CAT under section 76 CATCA 2003 to the extent that Revenue is satisfied that it has been, or will be, applied to purposes which in accordance with the laws of the State are public or charitable whether it is so applied within or without the State.
Under section 17(1)(a) CATCA 2003, discretionary trusts set up exclusively for purposes which, in accordance with the law of the State, are public or charitable are exempt from the charge to discretionary trust tax. Prior to the passing of the 2014 Finance Act, the exemption applied only to discretionary trusts created exclusively for public or charitable purposes in the State or Northern Ireland. The Finance Act 2014 removed the territorial limit of “the State or Northern Ireland” in respect of inheritances taken on or after 23 December 2014.
19.7 Child of a stepchild
Under section 2 CATCA 2003, a child includes a stepchild. Therefore, the Group A threshold applies to a stepchild and to a minor child of a deceased stepchild. If a child of a deceased stepchild is not a minor, the Group B threshold applies.
19.8 Spouse/civil partner of disponer
The spouse/civil partner exemption applies to a donee or successor who is, at the date of the gift or at the date of the inheritance, the spouse/civil partner of the disponer. In cases where there is an interval between the date of death of the disponer and the taking of an inheritance by the disponer’s surviving spouse/civil partner (for example, where the inheritance consists of an appointment made by trustees out of a discretionary trust created by the will of the disponer or where the inheritance consists of a remainder interest taken after a prior life interest created by the disponer’s will) the surviving spouse/civil partner should be regarded as still being the disponer’s spouse/civil partner at the date of the inheritance even if the surviving spouse/civil partner has remarried in the period between the date of death and the date of the inheritance.
19.9 Common law spouses
The Group C threshold applies to a common law spouse. However, the hardship provisions of section 59 CATCA 2003 may apply where the financial position of a surviving common law spouse and their children is particularly difficult; for example, where the principal asset was the family home and it is affected by a substantial inheritance tax liability as a result of the death of one of the spouses. Therefore, prior to the finalisation of cases involving gifts and inheritances taken by common law spouses, the possibility that section 59 may apply should be considered.
19.10 Donee or successor is a surviving spouse/civil partner of a closer relation of the disponer
Paragraph 6 of Part 1 of Schedule 2 CATCA 2003 provides that where, at the date of a gift or at the date of an inheritance, the donee or successor is the surviving spouse/civil partner of a deceased person who, at the time of his or her death, was of nearer relationship than such donee or successor to the disponer, that nearer relationship shall apply for the purpose of computing the tax on the gift or inheritance. In cases where the surviving spouse/civil partner has remarried prior to the date of the gift or inheritance, paragraph 6 is regarded as applying notwithstanding the remarriage.
19.11 Taxation of income accruing during the administration of an estate
Where it is shown that a beneficiary of the estate of a deceased person was charged to income tax on income that accrued to the estate during the period between the date of death and the valuation date of the beneficiary’s inheritance, that income will not be taken into account in calculating that beneficiary’s liability to inheritance tax, and the proportion of the debts, funeral and testamentary expenses that are payable out of the part of the estate represented by the accrued income will, if the figures justify apportionment, be disallowed accordingly. Evidence that the beneficiary has been treated for income tax purposes as succeeding to the property from the date of death should be furnished.
19.12 The words “exempt from tax” in section 28(5)(e) CATCA 2003
Section 11 CATCA 2003 provides that an inheritance which consists of non-Irish property in a case where neither the disponer nor the beneficiary are resident or ordinarily resident in the State shall not be a taxable inheritance. The Revenue view is that, for the purposes of section 28(5)(e), this is an exemption of an inheritance.
19.13 Free loans: section 40 CATCA 2003
Where a person receives a loan of money at a nil rate of interest, Revenue’s view is that the best price referred to in section 40 (3) CATCA 2003 is the highest price a prudent lender/depositor could get in the open market from prospective prudent borrowers.
In practice, Revenue accepts the highest rate of return the person making the loan could obtain on investing the funds on deposit.
19.14 Connected gifts
Under section 8 CATCA 2003, gifts are deemed to come from the original disponer when they are gifted on within 3 years before or after the original gift. However, in cases where, for example, a gift (the first gift) is taken by a married child of the disponer and consists of a house or a site for a house and that child, in raising a mortgage on that property, finds that the lending institution as a requirement for the mortgage demands that the property is placed in the joint names of the spouses (the second gift), then, provided adequate evidence is given that the transfer into the joint names is at the insistence of the lender and that the first gift was not made to enable or facilitate the making of the second gift, section 8(1) will not apply.
Section 8(2) covers this situation and will also apply in all other cases where it can be shown to Revenue’s satisfaction that such gifts are not so connected.
19.15 Credit for allowable CGT
In most cases where both CAT and CGT are charged on the same property on the same event and where accordingly, a credit for CGT against CAT is allowable under section 104 CATCA 2003, the CGT will not have been paid at the time the CAT return is being submitted. In such cases, Revenue will allow a temporary credit until such time as the allowable CGT is actually paid.
19.16 Co-directors and business partners assurance
These are policies that are effected purely for commercial purposes and agreed between the individual partners/shareholders on an arm’s length basis without any intention to make a gift.
The approach to such policies, written in the form of own life in trust for others, is to treat the proceeds as exempt from inheritance tax in the following circumstances:
• Proceeds on death will be used to purchase the deceased’s shareholding. Any surplus arising will be liable to inheritance tax.
• The capital sum under each policy will reflect the policyholder’s shareholding.
• Payment of premiums will be made by the individual members, or on their behalf by the company or partnership out of the individual’s own company or partnership account.
• New partner(s)/shareholder(s) can join the arrangement at any time, subject to the conditions applicable to the existing members of the plan.
• On withdrawal from the company or on retirement, the policy of the partner who leaves reverts to that person who will no longer benefit in the continuing arrangement, provided his or her shareholding is sold on withdrawal, otherwise the person can remain a party to the arrangement. Such a policy will be an asset in the person’s estate on his or her death and will not be exempt from CAT.
• Where a partner refuses to join the arrangement or is unable to effect life insurance on medical grounds, he or she will be precluded from benefiting from the policies of his or her co-shareholders.
• On the death of a sole surviving partner or shareholder the policy on his or her life will be an asset in his or her estate and will not be exempt from CAT. Similarly, if a partnership breaks up or a company is wound up, policies that do not lapse will be liable on a death to CAT.
• The insurance policies can either be term assurance, endowment, or whole of life policies, with the death benefit only passing to the surviving shareholders.
• Co-directors/partnership insurance using ‘Own Life’ in trust must be supported by the following relevant documentation:
– buy/sell (or double option) agreement;
– reciprocal agreement;
– trust document.
The equalisation of premiums is not a requirement once the policies are clearly effected as part of a commercial arm’s length arrangement.
Early payment of the proceeds of these policies on foot of total and permanent disability or critical illness will not be regarded as giving rise to a CAT liability.
Similarly, the proceeds of standalone critical illness policies will be exempted, provided the criteria set out above are met. Finally, it is permissible to provide for the probable future increase in the value of the policyholder’s shareholding provided that this aspect is common to all policyholders. It must be emphasised however, that any surplus over and above that utilised to purchase the deceased’s shareholding will be liable to CAT.
19.17 Government securities: section 81 CATCA 2003
Where section 81 securities are held in a unit trust that is being wound up but certain of the securities are not sold but are distributed in specie to the unit-holders, then, provided all other conditions laid down by section 81 are fulfilled and the direct ownership of the securities commences at the instant the unit-holders’ ownership of the units ceases, the period of time for which unit-holders held the units will be treated as aggregable with the period for which they directly hold the securities.
19.18 Interest on clawback of reliefs and exemptions
Certain CAT reliefs and exemptions can be wholly or partly clawed back if an event occurs within a specified period following the gift or inheritance. Under section 51(3) CATCA 2003, interest will only be charged on the additional tax from the date the relief or the exemption ceases to apply and not from the valuation date. Where a clawback results from a sale of the property, the date of sale is the date the relief or exemption ceases to apply.
19.19 CAT & debt forgiveness arrangements
Section 5 CATCA 2003 provides that a person is deemed to take a gift where, under or in consequence of any disposition, that person becomes beneficially entitled in possession, otherwise than on a death, to any benefit otherwise than for full consideration in money or money’s worth paid by such person.
By virtue of the definition of “disposition” in section 2 (1) CATCA 2003 the release, forfeiture, surrender or abandonment of any debt or benefit, or the failure to exercise a right may be subject to CAT in certain situations.
Where, for bona fide commercial reasons, a financial institution enters into a debt restructuring, forgiveness or write-off arrangement with a customer, Revenue’s approach, subject to being satisfied as to the bona fides of the arrangement is that, as the financial institution does not intend to make a gift of any sort to the mortgagor/debtor, the mortgagor/debtor would not be subject to a CAT charge in respect of any such debt restructuring, forgiveness or write-off arrangement.
This treatment will only apply in the above-mentioned circumstances. It will not apply where any debt restructuring, forgiveness or write-off arrangement is undertaken for the purposes of the avoidance of tax.
19.20 Debt relieved or reduced under the Personal Insolvency Act 2012
Section 82(1)(cb) provides that any benefit that may be obtained where a debt that is relieved or reduced under the terms of a Debt Relief Notice, a Debt Settlement Arrangement or a Personal Insolvency Arrangement in accordance with the Personal Insolvency Act 2012, is not to be taken to be a gift or inheritance for CAT purposes.
19.21 Payment from trust capital to fund CAT liability of life tenant
It is not uncommon for a life interest trust to be established under a will and for the trustees to pay, out of the capital of the trust, the life tenant’s CAT liability arising on the taxable value of the life interest he or she takes. In such circumstances, Revenue will not consider there to be a CAT liability arising on the CAT payment itself, provided that the life tenant’s future income entitlement under the trust is reduced by an amount equal to the amount of CAT paid. Where this administrative treatment is availed of, the parties involved should retain appropriate records such as documentation pertaining to the life interest trust and the trust bank statements.
This treatment is intended to continue that which applied prior to the enactment of Finance Act 2010. Finance Act 2010 abolished secondary accountability for disponers, trustees, guardians of estates and personal representatives.1 Prior to its enactment, section 45(7) CATCA 2003 provided that trustees who paid CAT for a life tenant could not recover that tax from the life tenant. This meant that, on the payment of CAT by trustees for a life tenant, the life tenant was not charged for a deemed benefit taken from the trust by way of capital advancement.
19.21.1 Example
Aoife, aged 63, is the life tenant of a trust fund totalling €1,000,000, bequeathed to her by her father. As the life interest factor for a female aged 63 is 0.6000, the taxable value of Aoife’s life interest is €600,000. Aoife has already exceeded the Group A threshold, so her CAT liability at the current rate of 33% is €198,000. The trustees discharge this liability from the trust fund, thus reducing the fund from
€1,000,000 to €802,000. The capital amount Aoife enjoys has been reduced in proportion to the tax liability paid on her behalf. In accordance with the practice outlined above, Aoife is not liable for any additional CAT on the CAT payment discharged by the trustees on her behalf.
1 An exception to this applies in respect of estates with non-resident beneficiaries.
19.21.2 Payments from trust capital to fund life tenant’s CAT liability: Treatment where life tenant dies within 5 years
Where trustees pay CAT for a life tenant in circumstances where the interest taken is to cease on his or her death and the life tenant dies within 5 years, any CAT that is to be repaid in accordance with section 54(5) CATCA 20032 is to be repaid to the trustees rather than to the life tenant.
2 For guidance on the application of section 54 CATCA 2003, see Revenue Notes for Guidance on CATCA 2003.
Exemptions from Capital Acquisitions Tax (CAT) Capital Acquisitions Tax Manual Part 23
This document should be read in conjunction with Part 9 of the Capital Acquisitions Tax Consolidation Act 2003
23.1 Introduction
CATCA 2003 Part 9 provides for a number of exemptions from CAT depending on the relationship between the parties and on the nature of the benefits being provided. The exemptions are summarised below.
23.2 Exemption of small gifts
CATCA 2003 s.69 provides an exemption for gifts (but not inheritances) of up to
€3,000 taken by a person from any disponer in a calendar year. Any gifts within this limit are not taken into account in computing tax and are not included in any future aggregation. Where a gift exceeds this limit only the excess is to be taken into account for the purposes of calculating gift tax.
Example
Tom makes a cash gift of €30,000 to his granddaughter Joan in 2019. Tom has made no other gifts to Joan in 2019. The taxable value of the gift is €27,000 after the small gift exemption of €3,000 is deducted.
23.3 Exemption for spouses and civil partners
CATCA 2003 s.70 and s.71 provide for a full exemption for gifts and inheritances taken between spouses or between civil partners (within the meaning of the Civil Partnership Act 2010). There is no value limit to this exemption.
Example
John makes a gift of €10,000,000 to his wife Helen in 2018. This gift is completely exempt from gift tax.
23.4 Exemption for certain policies of insurance
CATCA 2003 s.72 and s.73 provide that the proceeds of life insurance policies, taken out expressly to pay CAT, are exempt from tax provided certain conditions are satisfied.
For the inheritance tax exemption, the main condition is that the inheritance must be taken on or after the death of the insured person and not later than one year after this death. For the gift tax exemption, the main condition is that the proceeds from the policy must be payable on a date that is more than eight years after the date on which the policy is effected.
Example
Andrew died in 2016, leaving a net estate of €300,000 but not including the €90,000 proceeds of a section 72 policy. By his will, he bequeaths the proceeds of the policy to his executor on trust to pay inheritance tax arising on his death, any balance of the proceeds to fall into his residuary estate. He bequeaths his residuary estate equally to his son Dermot, to Dermot’s wife Evelyn and to Dermot’s son Robert.
In the first instance, the inheritance tax is assessed ignoring the proceeds of the policy. Dermot, Evelyn and Robert each receive €100,000. While Dermot is below the tax-free threshold, Evelyn and Robert have tax liabilities of €27,000 and €22,000, respectively.
Evelyn and Robert receive legacies of €27,000 and €22,000 from the proceeds of the policy to pay their tax. Those amounts are not liable to inheritance tax. The balance of €41,000 of the proceeds of the policy goes equally to Dermot, Evelyn and Robert and is taxed as an inheritance of €13,666 taken by each of them on the day after Andrew’s death.
23.5 Exemption of certain policies of assurance
CATCA 2003 s.74 provides for an exemption from tax for certain policies of assurance on the life of a person where neither the disponer nor the donee or successor is domiciled or ordinarily resident in the State, at the date of the disposition and at the date of the gift or inheritance, respectively.
With effect from 27 March 2013, the exemption applies to policies known as ‘capital redemption policies’ issued by life assurance companies. These are a specific type of life assurance where there is no actual life assured under the assurance contract, but the policy is of a type that is in practice regarded as part of life assurance business.
23.6 Exemption of certain investment entities
CATCA 2003 s.75 provides for an exemption from tax for gifts and inheritances of units of certain investment entities (defined in the TCA 1997, Part 27). Units held in collective investment schemes, common contractual funds, investment limited partnerships or investment undertakings are exempt from tax in cases where neither the disponer nor the donee or successor is domiciled or ordinarily resident in the State, at the date of the disposition and at the date of the gift or inheritance, respectively. The CAT exemption applies in the case of the transfer of units in an investment limited partnership notwithstanding that this type of entity has been removed from the definition of “investment undertaking” in section 739B(1) TCA 1997.
23.7 Exemption for charitable or public purposes
CATCA 2003 s.76 provides that any gift or inheritance taken for purposes that are charitable or public in accordance with the law of the State is exempt from tax and is not taken into account in computing tax to the extent that Revenue is satisfied that it has been, or will be, applied to such purposes. The charitable or public purposes may be either inside or outside of the State.
Political donations taken and used for “political purposes” as defined by the Electoral (Amendment) Act, 2001 by political parties, politicians and election candidates satisfy the “public purposes” requirement of section 76 provided they meet the various requirements under that Act in relation to the receipt, amount, holding, use and recording of political donations.
23.8 Exemption of heritage property
CATCA 2003 s.77 and s.78 exempt from CAT gifts and inheritances of pictures, prints, books, manuscripts, works of art, jewellery, scientific collections or other things not held for the purposes of trading where the following conditions are satisfied:
(1) the property is of national, scientific, historic or artistic interest;
(2) the property is kept permanently in the State; and
(3) reasonable facilities for viewing are allowed to members of the public or to recognised bodies or to associations of persons.
A specific claim must be made to Revenue for this exemption.
This exemption also applies to houses and gardens in the State not held for the purposes of trading in respect of which:
(1) reasonable facilities for viewing were allowed to the public during the three- year period prior to the date of the gift or inheritance; and
(2) in respect of which reasonable facilities for viewing are allowed to the public following the gift or inheritance.
Where heritage property that would qualify for the exemption in section 77 has been held through a family controlled company (within the meaning of CATCA 2003 s. 27) any gift or inheritance of the shares in that company will qualify for exemption from CAT to the extent that the value of the shares relates to the heritage property.
23.9 Exemption of certain inheritances taken by parents
CATCA 2003 s. 79 provides that any inheritance taken by a parent of the disponer is exempt from CAT if that disponer took a non-exempt gift or inheritance from either or both of his or her parents within the five-year period prior to his or her death. It is not necessary that the inheritance be of the same property or of the same value as the prior gift or inheritance.
Example
On the death of his son Tony in 2019, Noel, his father, inherits property worth
€5,000,000 from Tony. In 2015, Noel had gifted Tony €20,000 in cash to help him start up a business. The inheritance taken by Noel is fully exempt from inheritance tax.
23.10 Exemption for payments relating to retirement
CATCA 2003 s. 80 provides that any retirement benefit, redundancy payment or pension paid to an employee or a former employee out of funds provided by the employer is not a gift or inheritance for the purposes of the CATCA 2003.
23.11 Exemption of certain securities
CATCA 2003 S 81 provides that a gift or inheritance of certain securities is exempt from CAT provided they have been issued on the condition that they are exempt from CAT when in the beneficial ownership of a person who is not domiciled nor ordinarily resident in the State.
23.12 Exemption of certain receipts
CATCA 2003 s. 82 provides that certain receipts are not gifts or inheritances. The exempted receipts include:
• compensation or damages received by a person for any wrong or injury suffered by that person in their person, property, reputation or means of livelihood,
• compensation or damages received by a person for any wrong or injury resulting in the death of any other person;
• winnings (in money or in money’s worth) from bona fide betting, lotteries, raffles or other games with prizes;
• property provided by friends of a bankrupt person or an arranging debtor to the Official Assignee in Bankruptcy or a remission or abatement of debts by creditors of a bankrupt or arranging debtor to enable that person to fulfil an offer of composition or a proposal made by a debtor in accordance with the Bankruptcy Act 1988 s. 39 or s. 87;
• any benefit arising out of the discharge of a debt under a Debt Relief Notice or the discharge or reduction in the amount of a debt under a Debt Settlement Arrangement or a Personal Insolvency Arrangement other than by reason of payment of that debt;
• receipts taken by certain relatives of the disponer, while the disponer is alive, for support, maintenance, or education purposes may be exempt from CAT. The payments made by the disponer must be regarded as part of the normal expenditure of a person in the circumstances of the disponer and must be reasonable having regard to the financial circumstances of the disponer.
With effect from 23 December 2014, in relation to receipts taken by children, the relief is confined to:
(i) a minor child of the disponer, or a minor child of the civil partner of the disponer, or
(ii) a child of the disponer, or a child of the civil partner of the disponer, who is older than 18 years but not older than 25 years and
who is receiving full-time education at any university, college, school or other educational establishment, or
(iii) a child of the disponer of any age who is permanently incapacitated by reason of physical or mental infirmity form maintaining himself or herself.
Also, with effect from 23 December 2014, the relief extends to orphaned children under section 82(4), subject to the same qualifying age requirements. Prior to this date the relief was confined to orphans who were minors.
For more detail on this relief see Revenue’s Guide to the CAT Treatment of Receipts by Children from their Parents for their Support, Maintenance or Education.
• ex-gratia payments made on or after 1 August 2013 to an individual or to the estate of a deceased individual by the Minister for Justice, Equality and Defence pursuant to the Magdalene Commission Report in respect of women who were admitted to and worked in Magdalene Laundries. However, the exemption does not extend to the beneficiaries of any subsequent distribution of that individual’s estate.
23.13 Exemption where disposition was made by the donee or successor
CATCA 2003 s. 83 provides that CAT is not chargeable on a gift or inheritance taken by a donee or successor under a disposition made by that donee or successor on the basis that a person cannot take a gift or inheritance from himself or herself.
Example
George sets up a discretionary trust in 2015 into which he transfers €2,000,000. He nominates himself, his spouse and his children as the beneficiaries of the trust. In 2017 the trustees appoint €1,000,000 from the trust to George. This payment is exempt because it is a benefit taken by George from himself.
23.14 Exemption relating to qualifying expenses of incapacitated persons
CATCA 2003 s. 84 provides that gifts or inheritances taken exclusively for the purposes of discharging the “qualifying” expenses of an individual who is permanently incapacitated by reason of physical or mental infirmity are exempt from tax.
See Part 22 of this manual for a more detailed description of this exemption.
23.15 Exemption relating to retirement benefits
CATCA 2003 s. 85 provides for an inheritance tax exemption, in certain circumstances, for inheritances taken by a child over the age of 21 from:
• an approved retirement fund (section 784A TCA 1997);
• an approved minimum retirement fund (section 784C TCA 1997);
• a vested* personal retirement savings account (sections 787A and 787G(4),(4B) TCA 1997) (for inheritances received on or after 27 March 2013); or
• a vested* retirement annuity contract (section 787)(1) TCA 1997.
*deemed to vest on the fund owner’s 75th birthday.
23.16 Exemption relating to certain dwellings
CATCA 2003 s. 86 provides for an exemption from CAT for inheritances of dwelling houses in certain circumstances. In order for this exemption to apply, all of the following conditions must be satisfied:
(1) the dwelling house must be the principal private residence of the disponer at the date of his or her death;
(2) the dwelling house must have been continuously occupied by the beneficiary as his or her only or main residence for a period of three years immediately preceding the date of the inheritance;
(3) the beneficiary must not be entitled to an interest in any other dwelling house at certain dates; and
(4) the beneficiary must continue to occupy the dwelling house as his or her only or main residence for a period of six years after the date of the inheritance.
Gifts of dwelling houses to dependent relatives of a donor may also qualify for the exemption in certain circumstances. 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 or an inheritance of a dwelling house taken by a dependent relative qualifies for the exemption, the dwelling house does not have to have been the principal private residence of the donor.
See Part 24 of this manual for a more detailed description of this exemption.
23.17 Exemption of certain benefits
CATCA 2003 s. 87 provides that, where a disponer makes a direction that a particular gift or inheritance should be taken by a beneficiary free from tax, the benefit is deemed to include the amount of the tax payable on that benefit.
See Part 14 of this manual for a more detailed description of this exemption.
23.18 Exemption of certain transfers from CAT following dissolution of marriage or civil partnership
CATCA 2003 s. 88 provides for a CAT exemption in respect of transfers of property between separated or divorced individuals where the property is transferred on foot of specified Court Orders.
23.19 Certain transfers by qualified cohabitants
CATCA 2003 s. 88A provides for a CAT exemption in respect of gifts and inheritances taken by a qualified cohabitant in accordance with a Court Order made under Part 15 of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010.
CAT Act
PART 9
Exemptions
69
Exemption of small gifts.
[CATA 1976 s53(1), (2) and (4)]
(1)In this section, “relevant period” means the period of 12 months ending on 31 December in each year.
(2)The first €3,000 of the total taxable value of all taxable gifts taken by a donee from any one disponer in any relevant period is exempt from tax and is not taken into account in computing tax.
(3)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 same relief is granted in respect of that inheritance under subsection (2) as if it were a gift.
70
Exemption for spouses (gifts).
[FA 1990 s127(1)]
Notwithstanding any other provisions of this Act, a gift taken by a donee, who is at the date of the gift the spouse or civil partner of the disponer, is exempt from tax and is not taken into account in computing tax.
71
Exemption for spouses (inheritances).
[FA 1985 s59(1)]
Notwithstanding any other provisions of this Act, an inheritance taken by a successor, who is at the date of the inheritance the spouse or civil partner of the disponer, is exempt from tax and is not taken into account in computing tax.
72
Relief in respect of certain policies of insurance.
[FA 1985 s60(1), (1A) and (2); FA 1990 s130; FA 1991 s118; FA 1996 s124]
(1)In this section—
“approved retirement fund tax” means tax which a qualifying fund manager is obliged to deduct in accordance with the provisions of section 784A(4)(c) of the Taxes Consolidation Act 1997;
“insured” means an individual or, in relation to a qualifying insurance policy where—
(a)the insured is an individual and the spouse or civil partner of that individual at the date the policy is effected,
(b)annual premiums are paid by either or both of them during their joint lives, and by the survivor of them during the life of such survivor, and
(c)the proceeds of the policy are payable on the death of such survivor, or on the simultaneous deaths of both such spouses or civil partners,
means—
(i)where the proceeds of the policy are so payable on the death of such survivor, that survivor, and the proceeds of the policy are deemed to have been provided by such survivor, as disponer, or
(ii)where the proceeds of the policy are so payable on the simultaneous deaths of both such spouses or civil partners, each of the spouses or civil partners, and each such spouse or civil partner is deemed to have provided the proceeds of the policy—
(I)to the extent that such proceeds are applied in paying the relevant tax of the insured who is that spouse or civil partner, and
(II)where the proceeds of the policy are not applied in paying relevant tax, to the extent that the proceeds not so applied are comprised in an inheritance taken under a disposition made by that spouse or civil partner;
“qualifying insurance policy” means a policy of insurance—
(a)which is in a form approved by the Commissioners for the purposes of this section,
(b)in respect of which annual premiums are paid by the insured during the insured’s life, and
(c)which is expressly effected under this section for the purpose of paying relevant tax;
“relevant tax” means approved retirement fund tax and inheritance tax payable in respect of an inheritance (excluding, in the computation of such tax, an interest in a qualifying insurance policy) taken—
(a)on the death of the insured,
(b)under a disposition made by the insured, where the inheritance is taken on or after the date of death of the insured and not later than one year after that death, or
(c)under a disposition made by the spouse or civil partner of the insured where the inheritance is taken only in the event of the insured not surviving the spouse or civil partner by a period of up to 31 days,
and the relevant qualifying insurance policy is—
(i)a policy of insurance within the meaning of paragraphs (a), (b) and (c) of the definition of “insured” in this subsection, or
(ii)a policy of insurance where the insured is an individual and the proceeds of the policy are payable only on the contingency of the insured surviving that spouse or civil partner.
(2)(a)An interest in a qualifying insurance policy which is comprised in an inheritance taken under a disposition made by the insured is, to the extent that the proceeds of the policy are applied in paying relevant tax, exempt from tax in relation to that inheritance and is not taken into account in computing tax.
(b)An interest in a qualifying insurance policy which is comprised in an inheritance taken under a disposition made by the insured is, to the extent that the proceeds of the policy are not applied in paying relevant tax, and notwithstanding the provisions of this Act, deemed to be taken on a day immediately after—
(i)the date of the death of the insured, or
(ii)the latest date (if any) on which an inheritance is taken in respect of which that relevant tax is payable,
whichever is the later.
(c)For the purposes of this section, an amount of the proceeds of a qualifying insurance policy equal to the amount of approved retirement fund tax shall be treated as applied in paying relevant tax of that amount.
73
Relief in respect of certain policies of insurance relating to tax payable on gifts.
[FA 1991 s119(1) to (5)]
(1)In this section—
“appointed date” means—
(a)a date occurring not earlier than 8 years after the date on which a relevant insurance policy is effected, or
(b)a date on which the proceeds of a relevant insurance policy become payable either on the critical illness or the death of the insured, or one of the insured in a case to which paragraph (b) of the definition of “insured” relates, being a date prior to the date to which paragraph (a) of this definition relates;
“insured” means—
(a)where the insured is an individual, that individual, or
(b)where the insured is an individual and the spouse or civil partner of that individual at the date the policy is effected, that individual and the spouse or civil partner of that individual, jointly or separately, or the survivor of them, as the case may be;
“relevant insurance policy” means a policy of insurance—
(a)which is in a form approved by the Commissioners for the purposes of this section,
(b)in respect of which annual premiums are paid by the insured,
(c)the proceeds of which are payable on the appointed date, and
(d)which is expressly effected under this section for the purpose of paying relevant tax;
“relevant tax” means gift tax or inheritance tax, payable in connection with an inter vivos disposition made by the insured within one year after the appointed date, excluding gift tax or inheritance tax payable on an appointment out of an inter vivos discretionary trust set up by the insured.
(2)The proceeds of a relevant insurance policy are, to the extent that such proceeds are used to pay relevant tax, exempt from tax and are not taken into account in computing such tax.
(3)Subject to sections 70 and 76, where the insured makes an inter vivos disposition of the proceeds, or any part of the proceeds, of a relevant insurance policy other than in paying relevant tax, such proceeds are not exempt from tax.
(4)A relevant insurance policy is a qualifying insurance policy for the purposes of section 72 where the proceeds of such relevant insurance policy become payable on the death of the insured or one of the insured in a case to which paragraph (b) of the definition of “insured” relates, if such relevant insurance policy would have been a qualifying insurance policy if it had been expressly effected under that section.
(5)A qualifying insurance policy for the purposes of section 72 is a relevant insurance policy where the proceeds of such qualifying insurance policy are used to pay relevant tax arising under an inter vivos disposition made by the insured within one year after the appointed date.
74
Exemption of certain policies of assurance.
[FA 1993 s133]
(1)In this section—
“assurance company” has the meaning assigned to it by section 706 of the Taxes Consolidation Act 1997;
“new policy” means—
(a)a policy of assurance on the life of any person issued, or
(b)a contract within the meaning of Article 2(2)(b) of 5 Directive 2002/83/EC of the European Parliament and of the Council of 5 November 20021 entered into,
on or after 1 January 2001 by an assurance company in the course of carrying on the business of life assurance;
“old policy” means a contract entered into by an assurance company in the course of carrying on a foreign life assurance business within the meaning of section 451 of the Taxes Consolidation Act 1997 and issued on or after 1 December 1992 and before 1 January 2001.
(2)Where any interest in a new policy or in an old policy is comprised in a gift or an inheritance, then any such interest—
(a)is exempt from tax, and
(b)is not taken into account in computing tax on any gift or inheritance taken by a donee or successor,
if it is shown to the satisfaction of the Commissioners that—
(i)such interest is comprised in the gift or inheritance at the date of the gift or at the date of the inheritance,
(ii)at the date of the disposition, the disponer is neither domiciled nor ordinarily resident in the State, and
(iii)at the date of the gift or at the date of the inheritance, the donee or successor is neither domiciled nor ordinarily resident in the State.
(3)Where—
(a)an interest in a new policy or in an old policy, as the case may be, which is comprised in a gift or inheritance came into the beneficial ownership of the disponer or became subject to the disposition prior to 15 February 2001, and
(b)the conditions at paragraphs (i) and (iii) of subsection (2) are complied with,
then that subsection shall apply to that interest in a new policy or in an old policy, as the case may be, if, at the date of the disposition, the proper law of the disposition was not the law of the State.
75
Exemption of specified collective investment undertakings.
(1)In this section—
“collective investment scheme” means a bona fide scheme for the purpose, or having the effect, solely or mainly, of providing facilities for the participation by the public or other investors in profits or income arising from the acquisition, holding, management or disposal of securities or any other property;
“common contractual fund” has the meaning assigned to it by section 739I of the Taxes Consolidation Act 1997;
“investment limited partnership” has the meaning assigned to it by section 739J of the Taxes Consolidation Act 1997;
“investment undertaking” has the meaning assigned to it by section 739B of the Taxes Consolidation Act 1997;
“unit”, in relation to a collective investment scheme, includes shares, members’ interests, limited partnership interests and any other instruments granting an entitlement to the income or investments from the scheme;
“unit”, in relation to a common contractual fund, has the meaning assigned to it by section 739I of the Taxes Consolidation Act 1997;
“unit”, in relation to an investment undertaking, has the meaning assigned to it by section 739B of the Taxes Consolidation Act 1997.
“unit”, in relation to an investment limited partnership, has the meaning assigned to it by section 739J of the Taxes Consolidation Act 1997;
(1A)For the avoidance of doubt, the definition of ‘collective investment scheme’ in subsection (1) does not include 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 securities, held by the depository, to hold those interests by way of a co-ownership interest in a fungible pool of underlying securities.
(2)Where any unit of a collective investment scheme which is incorporated or otherwise formed under the law of a territory outside the State, a common contractual fund, an investment limited partnership or an investment undertaking is comprised in a gift or an inheritance, then, such unit—
(a)is exempt from tax, and
(b)is not taken into account in computing tax on any gift or inheritance taken by the donee or successor,
if it is shown to the satisfaction of the Commissioners that—
(i)the unit is comprised in the gift or inheritance—
(I)at the date of the gift or the date of the inheritance, and
(II)at the valuation date,
(ii)at the date of the disposition, the disponer is neither domiciled nor ordinarily resident in the State, and
(iii)at the date of the gift or at the date of the inheritance, the donee or successor is neither domiciled nor ordinarily resident in the State.
(3)Where—
(a)any unit of an investment undertaking which is comprised in a gift or an inheritance came into the beneficial ownership of the disponer or became subject to the disposition prior to 15 February 2001, and
(b)the conditions of subparagraphs (i) and (iii) of subsection (2) are complied with,
then, that subsection shall apply to that unit of an investment undertaking comprised in a gift or an inheritance, if at the date of the disposition, the proper law of the disposition was not the law of the State.
76
Provisions relating to charities, etc.
[CATA 1976 s54(1), (2) and (4)]
(1)Where any person takes a benefit for public or charitable purposes that person is deemed—
(a)for the purposes of sections 5(1) and 10(1), to have taken that benefit beneficially, and
(b)for the purposes of Schedule 2, to have taken a gift or an inheritance accordingly to which the group threshold referred to in subparagraph (c) of the definition of ‘group threshold’ in paragraph 1 of Part 1 of Schedule 2 applies.
(2)A gift or an inheritance which is taken for public or charitable purposes is exempt from tax and is not taken into account in computing tax, to the extent that the Commissioners are satisfied that it has been, or will be, applied to purposes which, in accordance with the law of the State, are public or charitable.
(3)Except where provided in section 80(5), a gift or inheritance which a person takes on becoming entitled to any benefit on the application to public or charitable purposes of property (including moneys provided by the Oireachtas or a local authority) held for such purposes is exempt from tax and is not taken into account in computing tax.
77
Exemption of heritage property.
[CATA 1976 s55; FA 1978 s39(1) and (1A)]
(1)This section applies to the following objects, that is, any pictures, prints, books, manuscripts, works of art, jewellery, scientific collections or other things not held for the purposes of trading—
(a)which, on a claim being made to the Commissioners, appear to them to be of national, scientific, historic or artistic interest,
(b)which are kept permanently in the State except for such temporary absences outside the State as are approved by the Commissioners, and
(c)in respect of which reasonable facilities for viewing are allowed to members of the public or to recognised bodies or to associations of persons.
(2)(a)Any object to which this section applies and which, at the date of the gift or at the date of inheritance, and at the valuation date, is comprised in a gift or an inheritance taken by a person is exempt from tax in relation to that gift or inheritance, and the value of that gift or inheritance is not taken into account in computing tax on any gift or inheritance taken by that person unless the exemption ceases to apply under subsection (3) or (4).
(b)Section 89(5) shall apply, for the purposes of this subsection, as it applies in relation to agricultural property.
(3)If an object exempted from tax by virtue of subsection (2) is sold within 6 years after the valuation date, and before the death of the donee or successor, the exemption referred to in subsection (2) shall cease to apply to such object, but if the sale of such object is a sale by private treaty to the Chester Beatty Library, the Crawford Art Gallery Cork, the Irish Museum of Modern Art, the National Archives, the National Concert Hall, the National Gallery of Ireland, the National Library of Ireland, the National Museum of Ireland, the Commissioners of Public Works in Ireland, the Trust (within the meaning of section 1003A of the Taxes Consolidation Act 1997), any university in the State or any constituent college of such university, a local authority or the Friends of the National Collections of Ireland, the exemption referred to in subsection (2) shall continue to apply.
(4)The exemption referred to in subsection (2) shall cease to apply to an object, if at any time after the valuation date and—
(a)before the sale of the object,
(b)before the death of the donee or successor, and
(c)before such object again forms part of the property comprised in a gift or an inheritance (other than an inheritance arising by virtue of section 20) in respect of which gift or inheritance an absolute interest is taken by a person other than the spouse or civil partner of that donee or successor,
there has been a breach of any condition specified in paragraph (b) or (c) of subsection (1).
(5)Any work of art normally kept outside the State which is comprised in an inheritance which is charged to tax by virtue of section 11(1)(b) or 11(2)(c) is exempt from tax and is not taken into account in computing tax, to the extent that the Commissioners are satisfied that it was brought into the State solely for public exhibition, cleaning or restoration.
(6)Subsections (2) to (4) shall apply, as they apply to the objects specified in subsection (1), to a house or garden that is situated in the State and is not held for the purpose of trading and—
(a)which, on a claim being made to the Commissioners, appears to them to be of national, scientific, historic or artistic interest,
(b)in respect of which reasonable facilities for viewing were allowed to members of the public during the 3 years immediately before the date of the gift or the date of the inheritance, and
(c)in respect of which reasonable facilities for viewing are allowed to members of the public,
with the modification that the reference in subsection (4) to subsection (1)(b) or (c) shall be construed as a reference to paragraph (c) of this subsection and with any other necessary modifications.
(7)Without prejudice to the generality of subsection (6), the provision of facilities for the viewing by members of the public of a house or garden is not regarded as reasonable in relation to any year which is taken into account for the purposes of paragraphs (b) and (c) of subsection (1), unless—
(a)the National Tourism Development Authority has, on or before 1 January in that year, been provided with particulars of—
(i)the name, if any, and address of the house or garden, and
(ii)the days and times during the year when access to the house or garden is afforded to the public and the price, if any, payable for such access,
and
(b)in the opinion of the Commissioners—
(i)subject to such temporary closure necessary for the purpose of the repair, maintenance or restoration of the house or garden as is reasonable, access to the house or garden is afforded for not less than 60 days (including not less than 40 days during the period commencing on 1 May and ending on 30 September of which not less than 10 of the days during that period shall fall on a Saturday or a Sunday or both) in that year,
(ii)on each day on which access to the house or garden is afforded, the access is afforded in a reasonable manner and at reasonable times for a period, or periods in the aggregate, of not less than 4 hours,
(iii)access to the whole or to a substantial part of the house or garden is afforded at the same time, and
(iv)the price, if any, paid by members of the public in return for that access is reasonable in amount and does not operate to preclude members of the public from seeking access to the house or garden.
78
Heritage property of companies.
[FA 1995 s166(1) to (7)]
(1)In this section—
“relevant heritage property” means any one or more of the following—
(a)objects to which section 77(1) applies,
(b)a house or garden referred to in section 77(6) ;
“private company” has the meaning assigned to it by section 27 ;
“subsidiary” has the meaning assigned to it by section 155 of the Companies Act 1963.
(2)Where a gift or inheritance consists in whole or in part—
(a)at the date of the gift or at the date of the inheritance, and
(b)at the valuation date,
of one or more shares in a private company which (after the taking of the gift or inheritance) is, on the date of the gift or on the date of the inheritance, a company controlled by the donee or successor within the meaning of section 27, then each such share is, to the extent that its market value for tax purposes is, at the valuation date, attributable to relevant heritage property, exempt from tax and the value of such relevant heritage property is, to that extent, not to be taken into account in computing tax on any gift or inheritance taken by that person unless the exemption ceases to apply under subsection (5) or (6), subject to the condition that the relevant heritage property was in the beneficial ownership of the company on 12 April 1995, or in the beneficial ownership on that date of another company which was on that date a subsidiary of the first-mentioned company.
(3)Section 89(5) shall apply, for the purposes of subsection (2), as it applies in relation to agricultural property.
(4)Where in relation to a gift or inheritance—
(a)a part of a share in a private company is exempt from tax by virtue of subsection (2), and
(b)such share is relevant business property within the meaning of Chapter 2 of Part 10,
then the relevant heritage property to which the market value of such share is partly attributable is disregarded in determining for the purposes of that Chapter what part of the taxable value of that gift or inheritance is attributable to such share; but the amount of the reduction (if any) which would but for subsection (2) fall to be made under that Chapter in respect of such share shall not otherwise be restricted notwithstanding subsection (2).
(5)If a share in a private company which is exempted in whole or in part from tax by virtue of subsection (2) is sold within 6 years after the valuation date, and before the death of the donee or successor, the exemption referred to in subsection (2) shall, subject to subsection (7), cease to apply to such share.
(6)Where the whole or part of the market value of a share in a private company which is comprised in a gift or inheritance is on the valuation date attributable to an item of relevant heritage property and—
(a)that item of relevant heritage property is sold within 6 years after the valuation date, and before the death of the donee or successor, or
(b)at any time after the valuation date and—
(i)before the sale of such share or such item of relevant heritage property,
(ii)before the death of the donee or successor, and
(iii)before such share or such item of relevant heritage property forms part of the property comprised in a subsequent gift or inheritance in respect of which gift or inheritance an absolute interest is taken by a person other than the spouse or civil partner of that donee or successor,
there has been a breach of any condition specified in section 77(1)(b) or (c) or section 77(6)(c),
then the exemption referred to in subsection (2) shall, subject to subsection (7), cease to apply to such share to the extent that that market value is attributable to such item of relevant heritage property.
(7)Notwithstanding subsections (5) and (6), the exemption referred to in subsection (2) shall continue to apply if the sale of the share referred to in subsection (5), or the sale of the item of relevant heritage property referred to in subsection (6), is a sale by private treaty to the Chester Beatty Library, the Crawford Art Gallery Cork, the Irish Museum of Modern Art, the National Archives, the National Concert Hall, the National Gallery of Ireland, the National Library of Ireland, the National Museum of Ireland, any university in the State or any constituent college of such university, a local authority or the Friends of the National Collections of Ireland.
79
Exemption of certain inheritances taken by parents.
[FA 1995 s165]
Notwithstanding any other provision of this Act, an inheritance taken by a person from a disponer is, where—
(a)that person is a parent of that disponer, and
(b)the date of the inheritance is the date of death of that disponer,
exempt from tax and is not taken into account in computing tax if that disponer took a non-exempt gift or inheritance from either or both of that disponer’s parents within the period of 5 years immediately prior to the date of death of that disponer.
80
Payments relating to retirement, etc.
[CATA 1976 s56]
(1)In this section—
“superannuation scheme” includes any arrangement in connection with employment for the provision of a benefit on or in connection with the retirement or death of an employee;
“employment” includes employment as a director of a body corporate and cognate words shall be construed accordingly.
(2)Subject to subsection (3), any payment to an employee or former employee by, or out of funds provided by, that employee’s or former employee’s employer or any other person, bona fide by means of retirement benefit, redundancy payment or pension is not a gift or an inheritance.
(3)Subsection (2) shall not apply in relation to a payment referred to in that subsection, and any such payment is deemed to be a gift or an inheritance where—
(a)(i)the employee is a relative of the employer or other disponer, or
(ii)the employer is a private company within the meaning of section 27, and of which private company the employee is deemed to have control within the meaning of that section;
(b)the payment is not made under a scheme (relating to superannuation, retirement or redundancy) approved by the Commissioners under the Income Tax Acts; and
(c)the Commissioners decide that in the circumstances of the case the payment is excessive.
(4)(a)The Commissioners shall serve on an accountable person a notice in writing of the decision referred to in subsection (3).
(b)An accountable person aggrieved by such a decision of the Commissioners, notice of which is served on that person, may appeal the decision to the Appeal Commissioners, in accordance with section 949I of the Taxes Consolidation Act 1997, within 30 days after the date of the notice of that decision.
(5)Any benefit taken by a person other than the person in respect of whose service the benefit arises, under the provisions of any superannuation fund, or under any superannuation scheme, established solely or mainly for persons employed in a profession, trade, undertaking or employment, and their dependants, is (whether or not any person had a right enforceable at law to the benefit) deemed to be a gift or an inheritance, as the case may be, derived under a disposition made by the person in respect of whose service the benefit arises and not by any other person.
81
Exemption of certain securities.
[CATA 1976 s57(1) and (2); FA 1997 s135(2) (part); FA 2001 s219 (part)]
(1)In this section—
“security” means any security, stock, share, debenture, debenture stock, certificate of charge or other form of security issued, whether before, on or after the passing of this Act, and which by virtue of any enactment or by virtue of the exercise of any power conferred by any enactment is exempt from taxation when in the beneficial ownership of a person neither domiciled nor ordinarily resident in the State;
“unit trust scheme” means an authorised unit trust scheme within the meaning of the Unit Trusts Act 1990, whose deed expressing the trusts of the scheme restricts the property subject to those trusts to securities.
(2)Securities, or units (within the meaning of the Unit Trusts Act 1990) of a unit trust scheme, comprised in a gift or an inheritance are exempt from tax (and are not taken into account in computing tax on any gift or inheritance taken by the donee or successor) if it is shown to the satisfaction of the Commissioners that—
(a)the securities or units were comprised in the disposition continuously for a period of 15 years immediately before the date of the gift or the date of the inheritance, and any period immediately before the date of the disposition during which the securities or units were continuously in the beneficial ownership of the disponer is deemed, for the purpose of this paragraph, to be a period or part of a period immediately before the date of the gift or the date of the inheritance during which they were continuously comprised in the disposition;
(b)the securities or units were comprised in the gift or inheritance—
(i)at the date of the gift or the date of the inheritance, and
(ii)at the valuation date;
and
(c)the donee or successor is at the date of the gift or the date of the inheritance neither domiciled nor ordinarily resident in the State,
and section 89(5) shall apply, for the purposes of this subsection, as it applies in relation to agricultural property.
(3)Subsection (2)(a) shall not apply where—
(a)the disponer was neither domiciled nor ordinarily resident in the State at the date of the disposition, or
(b)the securities or units concerned came into the beneficial ownership of the disponer before 26 March 1997, or became subject to the disposition before that date, and the disponer was neither domiciled nor ordinarily resident in the State at the date of the gift or the date of the inheritance.
(4)Where the securities or units concerned came into the beneficial ownership of the disponer, or became subject to the disposition prior to 15 February 2001, then subsection (2) shall apply as if the reference to the period of 15 years in that subsection were construed as a reference to a period of 3 years.
82
Exemption of certain receipts.
[CATA 1976 s58]
(1)The following are not gifts or inheritances:
(a)the receipt by a person of any sum bona fide by means of compensation or damages for any wrong or injury suffered by that person in that person’s person, property, reputation or means of livelihood;
(b)the receipt by a person of any sum bona fide by means of compensation or damages for any wrong or injury resulting in the death of any other person;
(ba)any payment to which section 205A of the Taxes Consolidation Act 1997 applies;
(c)the receipt by a person of any winnings bona fide, in money or money’s worth, from—
(i)betting (including pool betting), or
(ii)any lottery, sweepstake or game with prizes;
(ca)the receipt by a person of an award from the competition ‘Your Country, Your Call’ which was launched by the President on 17 February 2010,
(cb)any benefit arising out of the discharge of a debt under a Debt Relief Notice (within the meaning of section 25 of the Personal Insolvency Act 2012) or arising out of the discharge or reduction in the amount of a debt under a Debt Settlement Arrangement or a Personal Insolvency Arrangement (both within the meaning of section 2 of that Act) other than by reason of payment of that debt;
(d)any benefit arising out of—
(i)the payment to the Official Assignee in Bankruptcy of money which has been provided by, or which represents property provided by, friends of a bankrupt, or
(ii)a remission or abatement of debts by the creditors of a bankrupt,
to enable the bankrupt to fulfil an offer of composition after bankruptcy in accordance with section 39 of the Bankruptcy Act 1988; and
(e)any benefit arising out of—
(i)the payment to the Official Assignee in Bankruptcy of money which has been provided by, or which represents property provided by, friends of an arranging debtor, or
(ii)a remission or abatement of debts by the creditors of an arranging debtor,
to enable the debtor to carry out the terms of a proposal made by that debtor under section 87 of the Bankruptcy Act 1988, which has been accepted by that debtor’s creditors and approved and confirmed by the High Court.
(2)Notwithstanding anything contained in this Act, the receipt in the lifetime of the disponer of money or money’s worth—
(a)by—
(i)a minor child of the disponer or of the civil partner of the disponer, or
(ii)a child of the disponer, or of the civil partner of the disponer, who is more than 18 years of age but not more than 25 years of age and is receiving full-time education or instruction at any university, college, school or other educational establishment, or who, regardless of age, is permanently incapacitated by reason of physical or mental infirmity from maintaining himself or herself, or
(iii)a person in relation to whom the disponer stands in loco parentis,
for support, maintenance or education, or
(b)by a person who is in relation to the disponer a dependent relative under section 466 of the Taxes Consolidation Act 1997, for support or maintenance,
is not a gift or an inheritance, where the provision of such support, maintenance or education, or such support or maintenance—
(i)is such as would be part of the normal expenditure of a person in the circumstances of the disponer, and
(ii)is reasonable having regard to the financial circumstances of the disponer.
(3)(a)In this subsection “incapacitated individual”, “trust funds” and “qualifying trust” have the meanings assigned to them, respectively, by section 189A (inserted by the Finance Act 1999) of the Taxes Consolidation Act 1997.
(b)The receipt by an incapacitated individual of the whole or any part of trust funds which are held on a qualifying trust, or of the income from such a qualifying trust, is not a gift or an inheritance.
(4)The receipt by—
(a)a minor child of the disponer or of the civil partner of the disponer, or
(b)a child of the disponer, or of the civil partner of the disponer, who is more than 18 years of age but not more than 25 years of age and is receiving full-time education or instruction at any university, college, school or other educational establishment, or who, regardless of age, is permanently incapacitated by reason of physical or mental infirmity from maintaining himself or herself,
of money or money’s worth for support, maintenance or education, at a time when the disponer and the other parent of any such minor child or child of the disponer are dead or, in the case of any such minor child or child of the civil partner of the disponer, when the disponer and the civil partner are dead, is not a gift or an inheritance where the provision of such support, maintenance or education—
(i)is such as would be part of the normal expenditure of a person in the circumstances of the disponer immediately before the death of the disponer, and
(ii)is reasonable having regard to the financial circumstances of the disponer immediately before the death of the disponer.
(5)The references in subsections (2) and (4) to a child receiving full-time education or instruction at an educational establishment shall include references to a child undergoing training by any person (in subsection (6) referred to as ‘the employer’) for any trade or profession in such circumstances that the child is required to devote the whole of his or her time to such training for a period of not less than 2 years.
(6)For the purposes of this section, in the case of a child undergoing training, the Commissioners may require the employer to furnish such particulars as they may reasonably require with respect to the training of the child in such form as may be prescribed by the Commissioners.
83
Exemption where disposition was made by the donee or successor.
[CATA 1976 s59]
(1)In this section, “company” means a body corporate (wherever incorporated), other than a private company within the meaning of section 27.
(2)Tax is not chargeable on a gift or an inheritance taken by the donee or successor under a disposition made by that donee or successor.
(3)Where, at the date of the gift, 2 companies are associated in the manner described in subsection (4), a gift taken by one of them under a disposition made by the other is deemed to be a gift to which subsection (2) applies.
(4)For the purposes of subsection (3), 2 companies shall be regarded as associated if—
(a)one company would be beneficially entitled to not less than 90 per cent of any assets of the other company available for distribution to the owners of its shares and entitlements of the kind referred to in section 43(1) on a winding up, or
(b)a third company would be beneficially entitled to not less than 90 per cent of any assets of each of them available as in paragraph (a).
84
Exemption relating to qualifying expenses of incapacitated persons.
[CATA 1976 s59A]
(1)In this section, “qualifying expenses” means expenses relating to medical care including the cost of maintenance in connection with such medical care.
(2)A gift or inheritance which is taken exclusively for the purpose of discharging qualifying expenses of an individual who is permanently incapacitated by reason of physical or mental infirmity is, to the extent that the Commissioners are satisfied that it has been or will be applied to such purpose, exempt from tax and is not taken into account in computing tax.
85
Exemption relating to retirement benefits.
[CATA 1976 s59B]
(1)In this section ‘retirement fund’, in relation to an inheritance taken on death of a disponer, means—
(a)an approved retirement fund or an approved minimum retirement fund, within the meaning of section 784A or 784C of the Taxes Consolidation Act 1997,
(b)a Personal Retirement Savings Account, within the meaning of section 787A of the Taxes Consolidation Act 1997, where assets of the Personal Retirement Savings Account are treated under subsection (4) or (4B), as the case may be, of section 787G of that Act of that Act as having been made available to an individual, or
(c)a vested RAC within the meaning of section 787O(1) of the Taxes Consolidation Act 1997,
being a fund which is wholly comprised of all or any of the following, that is—
(i)property which represents in whole or in part the accrued rights of the disponer, or of a predeceased spouse or civil partner of the disponer, under—
(I)an annuity contract or retirement benefits scheme approved by the Commissioners for the purposes of Chapter 1 or Chapter 2 of Part 30 of the Taxes Consolidation Act 1997, or
(II)a Personal Retirement Savings Account being a PRSA product approved by the Commissioners for the purposes of Chapter 2A of Part 30 of the Taxes Consolidation Act 1997,
(ii)any accumulations of income of such property, or
(iii)property which represents in whole or in part these accumulations.
(2)The whole or any part of a retirement fund which is comprised in an inheritance which is taken on the death of a disponer is exempt from tax in relation to that inheritance and the value of that inheritance is not taken into account in computing tax, where—
(a)the disposition under which the inheritance is taken is the will or intestacy of the disponer, and
(b)the successor is a child of the disponer or of the civil partner of the disponer and had attained 21 years of age at the date of that disposition.
86.
Exemption relating to certain dwellings
(1)In this section—
“dwelling house” means—
(a)a building or part (including an appropriate part within the meaning of section 5(5)) of a building which was used or was suitable for use as a dwelling, and
(b)the curtilage of the dwelling house up to an area (excluding the site of the dwelling house) of 0.4047 hectares, but if the area of that curtilage (excluding the site of the dwelling house) exceeds 0.4047 hectares, then the part which comes within this definition is the part which, if the remainder were separately occupied, would be the most suitable for occupation and enjoyment with the dwelling house;
“relevant period”, in relation to a relevant dwelling house comprised in an inheritance, means the period of 6 years commencing on the date of the inheritance;
“successor” includes a transferee under an inheritance referred to in section 32(2).
(2)In this section a “relevant dwelling house”, in relation to a disponer or a successor, as the case may be, is a dwelling house that—
(a)was occupied by the disponer as his or her only or main residence at the date of his or her death, and
(b)was continuously occupied by the successor as his or her only or main residence—
(i)throughout the period of 3 years immediately preceding the date of the inheritance, or
(ii)where the dwelling house replaced another dwelling house as that successor“s only or main residence, the first-mentioned dwelling house and the dwelling house that was replaced as that successor”s only or main residence, for periods which together comprised at least 3 years falling within the period of 4 years immediately preceding the date of the inheritance.
(2A)For the purposes of subsection (4A), a successor is deemed to be beneficially entitled to, or to have a beneficial interest in, a dwelling house that is subject to a discretionary trust under or in consequence of a disposition made by the successor where that successor is an object of the trust.
(3)For the purpose of subsection (2), a disponer or a successor, as the case may be, is deemed to occupy a dwelling house for a period during which he or she ceases to occupy that dwelling house in consequence of his or her mental or physical infirmity.
(4)Subject to subsections (4A), (4B), (5) and (6), a relevant dwelling house is exempt from tax in relation to the inheritance by the successor of the dwelling house and the value of the dwelling house shall not be taken into account in computing tax on any gift or inheritance taken by a successor who takes an inheritance of the relevant dwelling house.
(4A)For the purposes of subsection (4), and in relation to a disponer and a successor—
(a)a dwelling house shall not be regarded as a relevant dwelling house where the successor is beneficially entitled to, or has a beneficial interest in, any other dwelling house—
(i)at the date of the inheritance of the first-mentioned dwelling house in this paragraph (a), or
(ii)at the valuation date of the first-mentioned dwelling house in this paragraph (a), if this date is later than that date of inheritance and such entitlement to, or interest in, that dwelling house is taken from the disponer,
and
(b)where—
(i)a dwelling house to which the successor is beneficially entitled, or in which the successor has a beneficial interest, is regarded as a relevant dwelling house, and
(ii)that successor acquires a subsequent beneficial entitlement to or a beneficial interest in any other dwelling house by way of an inheritance taken from the disponer,
the first-mentioned dwelling house in this paragraph (b) shall cease to be regarded as a relevant dwelling house on the date on which that subsequent entitlement or interest is acquired.
(4B)Where paragraph (b) of subsection (4A) applies—
(a)subparagraphs (i) and (ii) of subsection (6) shall apply as if the dwelling house had not been a relevant dwelling house at the date of the inheritance, and
(b)the relevant date (within the meaning of section 46(5)) from which interest is to be charged in accordance with section 51(2) shall be the earliest valuation date for any other dwelling house to which the successor takes a beneficial entitlement or in which the successor takes a beneficial interest from the disponer if that date is later than the date which, apart from this subsection, would be the relevant date.
(5)For the purposes of subsection (4), a dwelling house shall not be regarded as a relevant dwelling house where it is taken?—
(a)by way of a gift, or
(b)under a disposition referred to in paragraph (c) of section 3(1),
unless it is taken by a dependent relative under subsection (9).
(6)Subject to subsection (7), a dwelling house shall cease to be regarded as a relevant dwelling house where—
(a)the dwelling house is sold or disposed of (either in whole or in part) within the relevant period and before the death of a successor, or
(b)a successor ceases to occupy the dwelling house as his or her only or main residence during the relevant period,
and, as a consequence of such sale, disposal or cessation—
(i)tax shall be chargeable in relation to the inheritance by the successor of the dwelling house, and
(ii)the value of the dwelling house shall be taken into account in computing tax on any gift or inheritance taken by a successor who takes an inheritance of the relevant dwelling house,
as if that dwelling house had not been a relevant dwelling house at the date of the inheritance.
(7)(a)Notwithstanding subsection (6), a dwelling house shall not cease to be regarded as a relevant dwelling house where—
(i)the entirety of the consideration for the sale or disposal of the dwelling house (in this subsection and in subsection (8) referred to as the “inherited dwelling house”) is used by a successor to acquire a dwelling house to replace the inherited dwelling house as the successor“s only or main residence (in this subsection and in subsection (8) referred to as the ”replacement dwelling house“), the period of occupation of which as the successor”s only or main residence, when added to the period of occupation of the inherited dwelling house as his or her only or main residence, amounts to an aggregate period comprising at least 6 years falling within the period of 7 years commencing on the date of the inheritance,
(ii)a successor is of the age of 65 years or over at the date of the inheritance of the dwelling house,
(iii)a successor ceases to occupy the dwelling house in consequence of his or her mental or physical infirmity (which infirmity is certified by a registered medical practitioner who is registered in the register established under section 43 of the Medical Practitioners Act 2007), whether or not the dwelling house is sold or disposed of, or
(iv)a successor is required to be absent from the dwelling house in consequence of any condition imposed by his or her employer requiring the successor to reside elsewhere for the purposes of performing the duties of his or her employment.
(b)Subparagraphs (iii) and (iv) of paragraph (a) shall apply to a replacement dwelling house, as they apply to a relevant dwelling house.
(8)Where the consideration for the sale or disposal of an inherited dwelling house, or a replacement dwelling house, as the case may be, (in this subsection referred to as the “sold dwelling house”) exceeds the consideration for the acquisition of any replacement dwelling house (in this subsection referred to as the “acquired dwelling house”) acquired as a replacement for the sold dwelling house, then the value of the sold dwelling house which is chargeable to tax under subsection (6) shall be reduced in the same proportion as the consideration for the acquired dwelling house bears to the consideration for the sold dwelling house.
(9)(a)In this subsection—
“relative”, in relation to the disponer, or to the spouse or civil partner of the disponer, as the case may be, means lineal ancestor, lineal descendant, brother, sister, uncle, aunt, niece or nephew;
“dependent relative” means a relative who is—
(i)permanently and totally incapacitated by reason of mental or physical infirmity from maintaining himself or herself, or
(ii)of the age of 65 years or over.
(b)For the purposes of this section, a dependent relative who takes a gift of a dwelling house shall be deemed to take the dwelling house as an inheritance on the date of the gift.
(c)Where a dependent relative takes or inheritance of a dwelling house, paragraph (a) of subsection (2) shall not apply for the purposes of determining whether the dwelling house is a relevant dwelling house.
87
Exemption of certain benefits.
[FA 1982 s98]
Where a gift or an inheritance is taken, by direction of the disponer, free of tax, the benefit taken is deemed to include the amount of tax chargeable on such gift or inheritance but not the amount of tax chargeable on such tax.
88Exemption of certain transfers from capital acquisitions tax following dissolution of marriage or civil partnership.
(1)Notwithstanding any other provision of this Act, a gift or inheritance taken by virtue or in consequence of an order to which this subsection applies by an individual who was a party to the marriage concerned, or to the civil partnership concerned, is exempt from tax and is not taken into account in computing tax.
(2)Subsection (1) applies—
(a)to a relief order or an order under section 25 of the Family Law Act 1995, made, following the dissolution of a marriage,
(b)to a maintenance pending relief order made, following the granting of leave under section 23(3) of the Family Law Act 1995, to a spouse whose marriage has been dissolved,
(c)to an order referred to in section 41(a) of the Family Law Act 1995, or an order under section 42(1) of that Act made in addition to or instead of an order under section 41(a) of that Act, in favour of a spouse whose marriage has been dissolved,
(d)to an order under Part III of the Family Law (Divorce) Act 1996,
(e)to an order under Part 12 of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010, and
(f)to an order or other determination to like effect, made on or after 10 February 2000, which is analogous to an order referred to in paragraph (a), (b), (c), (d) or (e) of a court under the law of another territory made under or in consequence of the dissolution of a marriage or civil partnership, being a dissolution that is entitled to be recognised as valid in the State.
Certain transfers by qualified cohabitants.
Notwithstanding any other provision of this Act, a gift or inheritance taken by virtue or in consequence of an order under Part 15 of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 by a qualified cohabitant, within the meaning of that Act, is exempt from tax and is not taken into account in computing tax.