CAPITAL ACQUISITIONS TAX: Now more than ever.

CAPITAL ACQUISITIONS TAX:

 

Capital Acquisitions Tax applies equally to Gifts and Inheritances, the original distinction now long forgotten. In 2015 CAT raised approx €400m for Government coffers.Even though it is levied at more than 3 times the international average, it’s not going to be reduced here anytime soon.

 

We, the Taxpayer, are allowed a lifetime Tax Free Threshold on which we don’t pay any tax. The Threshold is dependent on our relationship with the testator (inheritance) or donor (gift). Thresholds and the applicable rate of tax have in recent time become a moveable feast. Look at the differences between 2008 and 2017:

 

2008 2012 2017
Rate of Tax 20% 30% 33%
Group A Threshold €521,208.00 €250,000.00 €310,000.00

Look at the effects of this using various amounts of benefit:

 

Benefit Amount:

 2008

 2012

 2017

€500,000.00 NIL €75,000.00 €62,700.00
€1000000.00 €95758.00 €225000.00 €227700.00
€1500000.00 €195758.00 €375000.00 €392700.00
€2000000.00 €295758.00 €525000.00 €557700.00

 

The Capital Acquisitions Tax take on an estate increased from an average of just under 15% in 2008 to almost 28% in 2017! Tax creep in operation.

 

You work hard during your lifetime to gain reward. You pay your taxes on that reward and you want to leave what you have left on your death to your loved ones, your nearest and dearest. And the Government will take more again, up to 28% of what has already been taxed.

 

The lesson is simple. Do not ignore estate planning. Tax avoidance is legal, tax evasion is not. Avail of the mechanisms available to reduce the tax payable on your estate. Take expert advice. Consult a Trust and Estate Practitioner.

 

* Current Tax free Thresholds at May 2017 are: Class A €310,000; Class B €32,500; and Class C €16,250.

 

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Declan O’Toole BCL is a Trust and Estate Practitioner and advises on Estate Planning.