Exemption of Certain Securities
Legislation - Section 81, Capital Acquisitions Tax Consolidation Act, 2003.
Government securities and securities issued by certain local authorities and statutory bodies are exempt from either Gift or Inheritance Tax if they are taken by a beneficiary who is neither domiciled nor ordinarily resident in the State. This exemption is not available in relation to discretionary trust tax.
The exemption also applies to authorised "unit trust schemes" provided the assets in the unit trust are confined to securities covered by the exemption.
Conditions for relief
- the security or units must be comprised in the benefit both at the date of the benefit and at the valuation date;
- the security or units must be comprised in the disposition continuously for a period of fifteen years immediately before the date of the benefit if they were acquired on or after 24 February, 2003 (if they were acquired between 15 February 2001 and 24 February 2003 the period is six years and prior to 15 February 2001 the period is three years); and
- the beneficiary must be neither domiciled nor ordinarily resident in the State at the date of the benefit.
Note that if a beneficiary who is neither domiciled or ordinarily resident in the State takes Government securities or units from a disponer who is neither domiciled nor ordinarily resident in the State at the date of the disposition (irrespective of the disponer's domicile or ordinary residence at the date of the gift/inheritance) they will qualify for exemption even if the three year/six year/fifteen year condition is not complied with.
Example 1
John, who was domiciled and ordinarily resident in the State, died on 1 October, 2002 and left his entire estate including Government Stock to his cousin Joe who was domiciled and ordinarily resident in France. The Government Stock was purchased by John in 1994. As John owned the Government Stock for at least three years prior to his death, they are exempt from Inheritance Tax.
If John had purchased the stock in March 2000, they would not qualify for relief as he did not own them for three years prior to his death.
Example 2
Mary, who is domiciled and ordinarily resident in England, purchased Government Stock in January, 2000. On 1 December 2002 she made a gift of the shares to her nephew David who was also domiciled and ordinarily resident in England. The shares qualify for exemption, even though Mary did not own them for three years, as both Mary and David are domiciled and ordinarily resident outside of the State.
Example 3
Tony who died in 1992 by his will left his residuary estate to his sister Mary for life and on her death to her daughter Sinead who is domiciled and resident in Spain. In 1995 the trustees of the settlement purchased Government Stock. Mary, the life tenant died on 1 September, 2002. The Government Stock which forms part of the residue, will qualify for exemption from Inheritance Tax as it has been comprised in the disposition continuously for a period of three years immediately prior to the date of the inheritance, i.e. 1 September, 2002 because it was comprised in the settlement since 1995.
It should be noted that exempt Government Stocks may have to bear a proportion of liabilities, costs and expenses and in that event, the proportion of the liabilities etc. referable to the exempt stock is not deductible.