Death and taxes – the only two things we can all be sure of in this life! Most people are aware that various taxes are triggered by death, but many families in Ireland still do not plan adequately for the passing of assets on to the next generation
Most of the relevant taxes have increased dramatically in recent years. In 2008, Capital Acquisition Tax (CAT) and Capital Gains Tax (CGT) in Ireland were just 20% and today – after the latest budget increases – they stand at 33%: a massive 65% increase in just four years. The increased rate applies in respect of gifts, inheritances and disposals made after 5 December 2012.
But it’s not just the rate of tax that has changed; there has a further hit with the reduction in the CAT tax free thresholds (i.e. the amount you can transfer tax free). This month’s budget included a further reduction in the tax-free threshold for gifts/inheritances received by children from their parents from €250,000 to €225,000. In early 2009 the same threshold was €542,544.
The combined impact of the changes in recent years is huge. For example, assume a transfer of assets worth €500,000 from parent to child: In early 2009 this transaction would have a CAT liability of €0
Today the CAT would amount to €90,750! None of the other tax changes has had such a dramatic effect.
A window of opportunity?
Notwithstanding the above changes, some generous reliefs from CGT and CAT still remain. The 2009 Commission on Taxation recommended significant changes to the reliefs available. As yet very little has been changed – but for how much longer?
The reliefs still available include business relief, agricultural relief and dwelling house relief. Certain conditions must be met in order to qualify for these reliefs and in many cases substantial assets can still be transferred tax free. Proactive tax planning at this point can help ensure you make the most of these reliefs whilst they are still around.
For advice on making the most of the current reliefs, and for further information on CGT and CAT visit www.revenue.ie or contact McLaughlin McGonigle, St Helens, St Oran’s Road Buncrana, Co. Donegal. Tel +353 (0)74 9321420 / Fax +353 (0)74 9321421/or email: firstname.lastname@example.org
McLaughlin McGonigle t/a MLMG Financial Advisors is authorised to undertake investment business in Ireland by the Association of Chartered Certified Accountants