Capital Acquisitions Tax - Finance Bill 2014

Revenue is limited in what it can say about the Finance Bill because it is going through the Houses of the Oireachtas at the moment.

The current section contains an exemption from CAT for payments made for the support and maintenance or education of children, including the children of the civil partner, or made to a person to whom the donor stands in loco parentis. The proposed amendments are subject to revision but any amendment to the section would be designed to counter the current abuse of the section.

The concern is that this exemption is being applied by law firms and tax advisors for High Wealth Individuals to avoid CAT on very substantial gifts rather than normal expenditure. Revenue is aware of cases where, for example, gifts such as cars and houses have been transferred to adult children. When queried by Revenue, practitioners have sought to argue that these gifts constitute gifts made in money or money’s worth for maintenance, support or education. It is clear that the legislation was never intended to apply in this way.

The proposed amendment confines the exemption to payments made to minor children and to children under the age of 25 in full-time education. The tightening of the rules in the Finance Bill is to protect the exemption from spurious claims.

It is necessary to be clear that gifts to children by parents are not all taxable. In the first place there is a small gift exemption of €3,000 per annum. In addition gifts and inheritances are only taxable if, in aggregate, they exceed a lifetime threshold of €225,000 and are only taxable on the amount in excess of that threshold.

There is no basis to the claim that Revenue will attempt, in applying this aspect of the legislation, to impute a value to the provision of board and lodging for CAT purposes in the circumstances described or to impute a value to services provided to family members. This has been made clear to practitioners and representative groups, including the Law Society, at the Tax Administration Liaison Committee. As a matter of course, once the Finance Bill is enacted, Revenue will issue a detailed public statement to practitioners which will outline how the section will work in practice.

[Ends 12/11/2014]