If you receive a gift, you may have to pay gift tax on it. If you receive an inheritance following a death, it may be liable to inheritance tax. Both these taxes are types of Capital Acquisitions Tax.
The benefit (the gift or inheritance) is taxed if its value is over a certain limit or threshold. Different tax-free thresholds apply depending on the relationship between the disponer (the person giving the benefit) and the beneficiary (the person receiving the benefit). There are also a number of exemptions and reliefs that depend on the type of the gift or inheritance.
If you receive a gift or inheritance from your spouse or civil partner, you are exempt from Capital Acquisitions Tax.
The tax applies to all property located in Ireland. It also applies where the property is not located in Ireland but either the person giving the benefit or the person receiving it are resident or ordinarily resident in Ireland for tax purposes.
Budget 2020: The Group A tax-free threshold, which applies primarily to gifts and inheritances from parents to their children, will increase from €320,000 to €335,000. This increase applies to gifts or inheritances received on or after the 9 October 2019. There is no change to Group B or Group C tax-free thresholds.
The benefit (the gift or inheritance) is taxed if its value is over a certain limit or threshold. Different tax-free thresholds apply depending on the relationship between the disponer (the person giving the benefit) and the beneficiary (the person receiving the benefit). There are also a number of exemptions and reliefs that depend on the type of the gift or inheritance.
If you receive a gift or inheritance from your spouse or civil partner, you are exempt from Capital Acquisitions Tax.
The tax applies to all property located in Ireland. It also applies where the property is not located in Ireland but either the person giving the benefit or the person receiving it are resident or ordinarily resident in Ireland for tax purposes.
Budget 2020: The Group A tax-free threshold, which applies primarily to gifts and inheritances from parents to their children, will increase from €320,000 to €335,000. This increase applies to gifts or inheritances received on or after the 9 October 2019. There is no change to Group B or Group C tax-free thresholds.
Group Thresholds
Gifts and inheritances can be received tax-free up to a certain amount. The tax-free amount, or threshold, varies depending on your relationship to the person giving the benefit. There are three different categories or groups. Each has a threshold that applies to the total benefits you have received in that category since 5 December 1991.
Group A
Applies where the beneficiary, the person receiving the benefit, is a child of the person giving it. This includes a stepchild or an adopted child.
It can also include a foster child if the foster child resided with and was under the care of the disponer and they provided the care, at their expense, for a period or periods totalling at least 5 years before the foster child reached the age of 18. This minimum period does not apply in the case of an inheritance taken on the date of death of the disponer. In this case the Group A threshold will apply provided that the foster child had been placed in the care of the disponer prior to that date.
Group A also applies to parents who take an inheritance from their child but only where the parent takes full and complete ownership of the inheritance. If a parent receives an inheritance where they do not have full and complete ownership of the benefit, or if a parent receives a gift, then Group B applies.
If a parent inherits from their child, and they have full and complete ownership of the inheritance it is exempt from tax if, in the previous five years, the child took an inheritance or gift from either parent and it was not exempt from Capital Acquisitions Tax. In this case, no tax needs to be paid even if the inheritance from the child is over the threshold.
It can also include a foster child if the foster child resided with and was under the care of the disponer and they provided the care, at their expense, for a period or periods totalling at least 5 years before the foster child reached the age of 18. This minimum period does not apply in the case of an inheritance taken on the date of death of the disponer. In this case the Group A threshold will apply provided that the foster child had been placed in the care of the disponer prior to that date.
Group A also applies to parents who take an inheritance from their child but only where the parent takes full and complete ownership of the inheritance. If a parent receives an inheritance where they do not have full and complete ownership of the benefit, or if a parent receives a gift, then Group B applies.
If a parent inherits from their child, and they have full and complete ownership of the inheritance it is exempt from tax if, in the previous five years, the child took an inheritance or gift from either parent and it was not exempt from Capital Acquisitions Tax. In this case, no tax needs to be paid even if the inheritance from the child is over the threshold.
Group B
Group B applies where the beneficiary is the:
Group A may apply to a nephew or niece if they have worked in the business of the person giving the benefit for the previous five years and meets the following criteria:
- Parent - see also Group A above
- Grandparent
- Grandchild or great-grandchild - see below
- Brother or sister
- Nephew or niece of the giver - see below
Group A may apply to a nephew or niece if they have worked in the business of the person giving the benefit for the previous five years and meets the following criteria:
- The nephew or niece must be a blood relation rather than a nephew or niece-in-law
- The gift or inheritance consists of property used in connection with the business, including farming, or of shares in the company.
- If the gift or inheritance consists of property then the nephew or niece must work more than 24 hours a week for the disponer at a place where the business is carried on, or for the company if the gift or inheritance is shares. But if the business is carried on exclusively by the disponer, their spouse and the nephew or niece then the requirement is that the nephew or niece work more than 15 hours a week.
- The relief does not apply if the benefit is taken under a discretionary trust.
Group C
Group C applies to any relationship not included in Group A or Group B.
If you receive a benefit from a relation of your deceased spouse or civil partner, you can be assessed with the same group as your spouse or civil partner would have been if they were receiving the benefit from their relation. For example, if you receive a benefit from the father of your spouse or civil partner, the group threshold would be Group C. But if you receive a benefit from the father of your spouse or civil partner and your spouse or civil partner is deceased, then the group threshold that applies to you would be the same as for a child receiving a benefit from a parent, Group A.
Current CAT thresholds (from 9 October 2019)
Group A €335,000; Group B €32,500, Group C €16,250
If you receive a benefit from a relation of your deceased spouse or civil partner, you can be assessed with the same group as your spouse or civil partner would have been if they were receiving the benefit from their relation. For example, if you receive a benefit from the father of your spouse or civil partner, the group threshold would be Group C. But if you receive a benefit from the father of your spouse or civil partner and your spouse or civil partner is deceased, then the group threshold that applies to you would be the same as for a child receiving a benefit from a parent, Group A.
Current CAT thresholds (from 9 October 2019)
Group A €335,000; Group B €32,500, Group C €16,250