Capital Acquisitions Tax Aggregation rules

Cocooning2020

Hi There,

I'm trying to figure out the aggregation rules for gifts given / the inheritance received when the CAT thresholds were different to what they are were on the date of death, but cannot for the life of me figure out what the correct calculation to do is (I have read the Revenue explanation, and read back through previous threads on here, but still cannot figure it).

The scenario is this:

(1) A was gifted a field from his father worth €60,000 in 2006, when the CAT Category A threshold was €478,155, and the CAT rate was 20%

(2) A was gifted a field from his father worth €140,000 in 2008, when the CAT Category A threshold was €521,208, and the CAT rate was 20%

(3) A inherited €275,000 from his father on his death in 2020, when the CAT Category A threshold was €335,000, and the CAT rate was 33%

The total is €475,000, which is under the 2006 and 2008 thresholds, but over the 2020 threshold. How do you figure out what CAT is payable now?

(I'm not so concerned about the €3,000 yearly gift allowance, which is easy enough to subtract for (1) and (2). It's how to figure out the impact of previous thresholds/rates. There has been no other Category A inheritance).

Any assistance much appreciated.

Thanks

Nessa

ismat

In this case you would be adding all previous gifts under this class and deducting the current class a threshold. So 475 less the 3k * 2 giving 469 less the current class a threshold to get the taxable amount

Cocooning2020

Thanks Ismat. So in effect the historic rates are completely irrelevant?

On that basis, say A had been gifted €521,208 in 2008, and nothing after that, he would have no tax to pay, but if he was left €4,000 in his father's will in 2020, he would then have to pay tax on 33% x (€525,208-€6,000-€335,000) = €60,788.64, for the sake of the €4,000 inheritance.

Is that definitely right? It seems pretty harsh.

relevanc

https://www.boards.ie/discussion/comment/117808671#Comment_117808671

That’s not correct.

The group threshold is used up.

Therefore €4,000 x 33% CAT

We sum up the gifts and inheritance received to date to calc if any group threshold is remaining based on the current threshold. It would not create a tax liability from an earlier gift/inheritance where the threshold was once higher.

Cocooning2020

Thanks Relevanc. Much appreciated.

Where does that leave me then on my original question? The thresholds were higher in 2006 and 2008, when the gifts were made. Are those thresholds now entirely irrelevant in calculating the CAT due, so that it doesn't in effect matter that the gifts were made in 2006/2008, rather than in 2020?

If there is no CAT advantage to be gained from the dates of the gifts, there will have been a significant tax "loss", in that the fields are now worth considerably less than what they were (over?)valued at in 2006/2008 (currently valued at €20,000 and €50,000 respectively, instead of €60,000 and €140,000 in 2006/2008) so would have been well under the CAT A threshold, had A inherited them on the date of death). That seems pretty unfair, but it may well be just how the chips fall.

It seems the father was very poorly advised that there was considerable advantage in transferring the fields over to A in his lifetime, and at the height of the boom. There was no need for it at all.

relevanc

https://www.boards.ie/discussion/comment/117809052#Comment_117809052

The current MV has no bearing on the above, only the MV on the date of the gift/inheritance.

The advice may have been sound at the time. Particularly if the intention was to sell the field(s) as the base cost for CGT would have been higher and reduced the CGT liability for the son. Nobody has a crystal ball to know what the tax legislation will be in 10-15 years down the line.