CAT (Non relative)

RiseToMe

Hi Guys,

We (wife and I) are in a position where a friend wishes to gift us a sum circa 40k. I can see they are in group c in terms of cat, however I am just wondering as my wife and I are jointly assessed do we have a allowance of 32500 (both allowed 16250 as per the guidelines) before taxes kick in?

They also wish to give money to our kids (under 2) I assume they don't have a tax allowance or fall under ours?

Being jointly assessed has nothing to do with CAT. If you are in group C you will both have the the 16250 tax free threshold. You can both also receive 3k per year under the small gifts exemption this is in addition to the group C threashold

Same for your kids they have their own group C threashold (they don’t come under yours) and they can also get 3k per year under the small gifts exemption.

Just to add that’s 3k per year per person, so 10 people could give you 3k each and it would be tax free.

You could talk to a tax advisor about how best to structure this but the basic ways to minimize tax and use of threasholds would be:

Get 3k each from the person at the end of the year then in January you could get another 3k each before having to use your threashold.

Another thing to look out for is if the person giving you the money is a coupe not a person. This then double the small gifts exemption as it’s coming from two people so you can each receive 6k tax free before needing to start using the threashold. Do this across two years and you can receive 12k each tax free before using thresholds.

RiseToMe

Fantastic thank you so much for the information, the person gifting us the money wants to give us X amount and wants to also cover the CAT to ensure we get a "minimum" so i just want to ensure that its as minimal as possible but still above board.



In the scenario where they gift us 3k each and then another amount, do they need to be separate transactions or can we take a lump sum and then apply the "3k to me, 3k to you" and CAT on the balance?

RiseToMe

RiseToMe wrote: »

In the scenario where they gift us 3k each and then another amount, do they need to be separate transactions or can we take a lump sum and then apply the "3k to me, 3k to you" and CAT on the balance?

The person will need to transfer it to its intended recipient but wont need to separate out the 3k from the balance.

In other words the person can't just transfer you the entire amount and then you dish it out among your wife and kids. They will need to transfer the amount they wish to gift to each of you (or a joint account which has the names of recipients on it, so if you and your wife have a joint account then both your gifts could be transferred as one). The 3k and applicable threshold (16250 in your case) is then deducted and CAT paid on the balance.

So of the person transfers you and your wife 40k to your joint account your calculation will be: 40000 - 6000 - 32500 = 1500*0.33 = 495 euro. So your tax would be 495 euro between yourself and your wife. If it's to an individual not a joint account you just use 3k and 16250 in the above calculation.

This is assuming you have the full 16250 available each (i.e. not received any group C gifts over 3k from an individual before). Also the threashold is a once off life time exemption so once its gone any future gifts from a person (above 3k per year) will be taxable on the full amount.