Changes to Capital Acquisitions Tax – Finance Act 2010

The Finance Act 2010 introduced a number of changes to the administration of gift and inheritance tax. Historically, a tax return and payment of tax must have been submitted within 4 months of the valuation date of a gift or inheritance.

The valuation date being the date on which:

• Market value of the property is ascertained,
• Tax is due and payable,
• Installments (where applicable) commence,
• Tax becomes a charge on the property,
• Test for farmer relief is applied.

Broadly speaking, the valuation date for a benefit is essentially the point in time at which the beneficiary becomes beneficially entitled in possession.

The 2010 Finance Act introduced a fixed pay and file date for gift/inheritance tax of 31st October, to align with the Income Tax pay and file deadline. All gifts and inheritances with a valuation date in the 12 month period ending on the previous 31st August will be included in the return (IT38) to be filed by 31st October.

Examples:
Valuation date 15 March 2011: File IT38 and pay tax by 31 October 2011
Valuation date 14 November 2011: File IT38 and pay tax by 31 October 2012

There is also an introduction of a surcharge for the late filing of a return.

• 5% (up to a maximum of €12,695) where the tax return is delivered within 2 months of the filing date.
• 10% (up to a maximum of €63,485) where the tax return is delivered after 2 months of the filing date.

Other changes include;

• Abolition of the status of CAT as a charge on property that has been the subject of a gift or inheritance in the previous 12 years.
• Abolition of secondary accountability i.e. where the beneficiary fails to pay the tax due and the person secondarily liable has control over the property passing.

• Requirement to appoint an Irish-resident “agent” who will be responsible for pay and file procedures where beneficiaries are non-resident.

Current Gift/ Inheritance Tax thresholds:

• Parent to Child €414,799
• Blood Relative €41,481
• Others €20,740

Rates:

• Threshold Amount - Nil
• Balance - 25%

For further information contact  OSK Tax or visit our tax section.