CAT

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Finance Act 2014 introduced a change to s.82 CATCA (Capital Acquisitions Tax Consolidation Act) 2003, which provides an exemption for payments by parents within their lifetime to their children to cover their support, maintenance and education. Prior to this change, the relief covered all such payments to the extent that they were ‘reasonable’ according to the parents’ means and formed part of their ‘normal’ expenditure.

It is thought that, given the broad definitions in place this lead to situations where some taxpayers were availing of the relief in respect of large scale transfers to their adult children. Revenue took issue with this as it went against the original intentions behind the relief.

With that in mind the relief has been restricted so that it will now cover payments to the following

• Minor children
• Children over the age of 18 but under the age of 25 who are receiving full time education at any university, college, school or other educational establishment. This will include training by an employer for the purposes of a trade or profession (where such training will last at least 2 years and will require the person to devote the whole of their time to this for that period).
• Children of any age who are permanently incapacitated by reason of mental or physical infirmity from maintaining themselves.

The main change is the introduction of a maximum age for the relief in the second case above.

It should be borne in mind that the annual small gift exemption of €3,000 from each disponer remains an extremely efficient means of passing on wealth in all cases, and should be considered as an alternative to the above exemption where this no longer applies due to the age restriction.

Contact Niall Dempsey, OSK Tax for more. OSK Tax Consultants provide tax planning advice including capital acquisition tax, personal tax and stamp duty saving you money.

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• Capital Acquisition Tax (CAT)

• Finance Act 2014