CAT Guide Reliefs
- Agricultural Relief
- Business Relief
- Favourite Nephew/Niece Relief
- Pre 1 April 1975 Marriage Settlements
Agricultural Relief
Business Relief
Favourite Nephew/Niece Relief
Paragraph 7, Part 1, Schedule 2, of the Act refers.
Favourite Nephew/Niece relief entitles a beneficiary who is a child of the disponer's brother or sister or a child of the civil partner of the disponer’s brother or sister to be treated as a "child" of the disponer provided certain conditions are met. Where the relief applies, the niece or nephew is entitled to the Group A threshold instead of the Group B threshold.
The relief applies to a niece or nephew who has worked substantially on a full-time basis for the disponer for the period of five years ending on the date the disponer ceases to have a beneficial interest in possession in the business. The relief will only apply to assets used in connection with the business. Note that farming is a business for the purposes of the relief. In order to qualify for the relief, the beneficiary must have worked a minimum number of hours in the disponer’s business, i.e.
- 15 hours per week in a small business, i.e. a business carried on exclusively by the disponer, the disponer’s spouse or civil partner and the nephew/niece.
- 24 hours per week in a larger business, i.e. where there are other employees.
Intervening life interest
Where there is an intervening life interest before the niece/nephew succeeds to the property, the beneficiary must have worked in the disponer’s business for the five years ending on the date the disponer’s interest in the business ceased.
Example
John (disponer) dies in 1996 and by his will leaves his business to his wife Mary for her life and on her death to his niece Anne.
Anne has worked substantially on a full time basis in the business since leaving school in 1990 and continues to work in the business after the death of John. On the death of Mary (life tenant) in 2009, Anne inherits the business. Anne will qualify for favourite niece relief, i.e. Group A threshold because she worked in the disponer's (John) business for the five years prior to the cessor of John’s interest in the business in 1996.
If in this example, Anne had only worked in the business since 1992 she would not qualify for the relief as she would only have been assisting the disponer John for 4 years.
Similiarly, if Anne had worked in the business for John from 1990 to 1996 and left the business after John’s death in1996, she would still qualify for favourite niece relief when she inherited the property on the death of Mary in 2009.
Companies and Favourite Nephew/Niece Relief
In order for shares in a private company to qualify for the relief, the company must be a private trading company controlled by the disponer in accordance with the provisions of section 27 of the Act and the disponer must also be a director of the company.
Note that investment assets included in a balance sheet are not regarded as business assets for the purpose of Favourite Nephew/Niece relief and a beneficiary will only be entitled to the Group B threshold on such assets.
Discretionary Trusts and Favourite Nephew/Niece Relief
Favourite Nephew/Niece relief will not apply if the benefit is taken under a discretionary trust.
Aggregation and Favourite Nephew/Niece Relief
The relief, i.e. Group A threshold (same threshold as a child) will only apply to business assets. If there is an inheritance/gift of both business and non-business assets, the Group A threshold will apply to business assets and the Group B threshold will apply to the non-business assets. As only benefits within the same Group threshold aggregate, the beneficiary will have two separate thresholds if the benefit consists of both business and non-business assets.
Unsecured Liabilities and Favourite Nephew/Niece Relief
In the event that the benefit consists of both business and non-business assets and there are unsecured liabilities, these must be apportioned pro rata between the business assets and non-business assets.
Example
James Murphy inherits the estate of his uncle in 2009. The inheritance consists of
- Agricultural Assets €500,000 (business)
- Non-agricultural Assets €100,000 (non-business)
- Debts and administration expenses €20,000
James qualifies for favourite nephew relief in respect of the business (agricultural assets). Assume for the purpose of this example that he does not qualify for agricultural or business relief.
The liabilities of €20,000 must be apportioned between the business and non-business assets as follows:
Business Assets
Gross Value Business Assets x total liabilities = €500,000/€600,000 (Gross Value All Assets) x €20,000 = €16,667
Non Business Assets
Gross Value Non Business Assets x total liabilities = €100,000/€600,000 (Gross Value All Assets) x €20,000 = €3,333
Taxable Value Business Assets = €500,000 less €16,667 = €483,333 (Group A)
Taxable Value non Business Assets = €100,000 less €3,333 = €96,667 (Group B)
- The inheritances of (a) Business Assets (Group A) and (b) Non-business Assets (Group B) do not aggregate even though they are part of the one inheritance (they are not within the same group threshold).
Pre 1 April 1975 Marriage Settlements
Legislation - Paragraph 8, Part 1, Schedule 2, Capital Acquisitions Tax Consolidation Act, 2003.
This relief applies to certain marriage settlements in relation to benefits taken by grandchildren of the disponer. The grandchild takes the group threshold of a child i.e. Group A.
The conditions for relief are as follows:
- the disposition must have been made prior to 1 April, 1975;
- the consideration for the disposition was the marriage of the parents of the beneficiary;
- the disponer is a grand-parent of the beneficiary;
- the parent or parents of the beneficiary must have been entitled to a limited interest in the settlement property.
Example
In 1974, in consideration of the marriage of his son Owen to Helen, Peter transfers his lands to Owen for life and on his death, if she survives him, to Helen for her life with remainder to any child or children of the marriage as the spouses jointly or the survivor of them should appoint and in default of the appointment to the children equally.
Owen died in 1990 and the lands passed to Helen for her life. Helen died in 2002 and in her will she appointed the lands to her daughter Rose. The disponer in relation to Rose's inheritance is her grand-father Peter. However, Rose will have a Group A threshold instead of the normal Group B threshold for a grandchild.
July 2011