CAT aggregation query

zagmund

Picture this scenario (using round figures for ease of interpretation) -

2001 - person receives gift of €75,000 from parent, below threshold, no tax paid
2009 - person inherits €500,000 from parent, threshold is €542,000, cumulative amount is €575,000, tax paid on €33,000, all good.
2012 - person receives gift of €10,000 from parent, cumulative amount is €585,000, but the threshold is now €225,000, so . . . there's 33% tax payable on €360,000 :eek:

From my reading of the Revenue documentation this appears to be the case. Someone please tell me it ain't so. Please.

Is there no concept of having paid all due taxes in 2009? I understand why you might want to aggregate all gifts over the years, but does the threshold in force at the time not come into play?

z

namenotavailablE

Almost right but not quite .

The general process (but you'll need to confirm this with your tax/financial adviser- I'm only outlining generalities here and be advised that there are certain benefits which may qualify for special CAT treatment but the treatment of which isn't detailed below) is as follows:

Step 1) Calculate tax on aggregate benefits less gift (not inheritances) exemptions less current tax free threshold =>using curent rates and thresholds (but use actual gift exemptions which applied at the time of the gift)
Step 2) Calculate tax on aggregate benefits [excluding current benefit] less gift exemptions and current tax free threshold => using current rates and thresholds (as above re value to use for gift exemptions)

The difference between the tax value calculated at step 1 and step 2 is the tax now payable.

Once again, I must emphasise that you should get a qualified tax advisor to do the calculations. Don't rely on this forum to give you an accurate & comprehensive answer for a high-value transaction such as the one you outlined.

zagmund

Thanks for the clarification. I can see where step 2 effectively takes account of the history by allowing that previous acquisitions have been accounted for.

z