Inheritance of ARF - subject to income tax at 30% and Inheritance tax?

justagirl · 19-05-2016 12:52PM #1

A child's parent passes away (parents spouse already deceased) and the parent had an Approved Retirement Fund (ARF) - which the child inherits. The ARF is subject to income tax at a rate of 30% before it is paid out. When this amount has been paid out (less the 30% income tax) - is the balance also subject to inheritance tax?

Thanks!

Mr. Incognito · 23-05-2016 10:12AM

justagirl wrote: »

A child's parent passes away (parents spouse already deceased) and the parent had an Approved Retirement Fund (ARF) - which the child inherits. The ARF is subject to income tax at a rate of 30% before it is paid out. When this amount has been paid out (less the 30% income tax) - is the balance also subject to inheritance tax?

Thanks!

I dont believe income tax would apply as the beneficiary of the ARF person is dead. How can they take it as income?

The Capitalised value of the ARF would fall into the estate and become an inheritance.

nompere · 23-05-2016 11:18PM

Mr. Incognito wrote: »

I dont believe income tax would apply as the beneficiary of the ARF person is dead. How can they take it as income?

The Capitalised value of the ARF would fall into the estate and become an inheritance.

Your belief appears to be ill-founded.

This is what Revenue say:

Death
23.10
Any payment, or imputed payment, from the ARF is a distribution and is taxable as such. The amount of the distribution is treated as income of the ARF owner for the year of assessment in which that individual dies. There are some exceptions:
 A transfer to an ARF in the name of the deceased’s spouse or civil partner is not a distribution.
 A transfer to a child of the individual under 21 is not a distribution.

However, a distribution made to a child aged 21 or over from:
 the ARF of the deceased, or
 an ARF in the name of a surviving spouse or surviving civil partner
funded by the ARF of the deceased spouse or civil partner, is subject to an income tax charge under Case IV of Schedule D at the rate of 30%
(which is a ring-fenced final liability tax).

http://www.revenue.ie/en/about/foi/s16/pensions/chapter-23.pdf

Mr. Incognito · 25-05-2016 12:32PM

nompere wrote: »

Your belief appears to be ill-founded.

This is what Revenue say:

Death
23.10
Any payment, or imputed payment, from the ARF is a distribution and is taxable as such. The amount of the distribution is treated as income of the ARF owner for the year of assessment in which that individual dies. There are some exceptions:
 A transfer to an ARF in the name of the deceased’s spouse or civil partner is not a distribution.
 A transfer to a child of the individual under 21 is not a distribution.

However, a distribution made to a child aged 21 or over from:
 the ARF of the deceased, or
 an ARF in the name of a surviving spouse or surviving civil partner
funded by the ARF of the deceased spouse or civil partner, is subject to an income tax charge under Case IV of Schedule D at the rate of 30%
(which is a ring-fenced final liability tax).

http://www.revenue.ie/en/about/foi/s16/pensions/chapter-23.pdf

Fair enough- the paragraph sets out further however that where Income tax applies the CAT will not.

I think that was the original question.

Inheritance of ARF - subject to income tax at 30% and Inheritance tax?

Comments