Capital Acquisitions Tax (CAT) – What you need to know

 

Capital Acquisitions Tax (CAT) imposes a charge on individuals who receive a gift or inheritance where the value of the gift/inheritance exceeds their lifetime tax free threshold.  Previously no CAT was charged on monies given by an individual during his/her lifetime for the support maintenance or education of his/her children.

Finance Act 2014 introduced an amendment whereby the exemption from tax for support, maintenance and education provided during the individuals lifetime only applies to the period during which the child is a minor or, where in full time education is under age 25 years.

Therefore, maintenance etc., provided after the age of 25 years may reduce the amount of the child’s lifetime tax free amount and ultimately become taxable at a rate of 33%.

The tightening of the rules does not affect the small gift exemption under which anyone can receive gifts of up to €3,000 in any year from anyone. Adult children could receive up to €6,000 a year from their parents, assuming both parents are still alive.

The threshold on lifetime gifts and inheritances from a parent to a child is  unaffected by the Finance Bill measure. It currently stands at €225,000 and no capital acquisitions tax is payable on cumulative gifts and inheritances from a parent below this figure.

Gifts under the €3,000 small gift exemption are not counted in this figure. Where capital acquisitions tax applies, it is levied at 33 per cent.