Latest news with #CapitalAcquisitionsTax
The Journal
5 days ago
- Business
- The Journal
New legislation could allow people choose who inherits their estate, say tax group
'CHOSEN RELATIONSHIP' LEGISLATION could allow individuals select one or two heirs to their estate under the same grouping as parent and child, a specialist expert group has told government. The Tax Strategy Group, an expert advisory panel at the Department of Finance, has noted that the point has been made that people who are not related could have 'equally close and meaningful relationships similar to familial relationships'. The tax experts state that there are a number of ways to develop a policy to capture these 'chosen' relationships. 'For instance, legislation could provide for individuals to select one or two heirs to their estate for Group A Threshold,' it states. Currently, Group A deals with the inheritance to a child (including certain foster children) when a parent dies. This threshold was increased in 2024 to €400,000 from a previous value of €335,000. Penalising people with no children However, in the run up to the election, a debate arose around inheritance tax rules favouring parents and penalising someone who is child-free. The net result in this situation, where 'chosen relationships' could be included in this grouping, would be a tax-free threshold, state the experts, however the paper said that this was not possible to cost. 'Therefore, the costings have been calculated on the basis of three separate instances of a tax-free €400,000 threshold for each group. This would create an additional cost to the Exchequer of €390 million based on up-to-date Revenue data,' state the review papers. Advertisement The Programme for Government contains a commitment to maintain a broad tax base of which Capital Acquisitions Tax (CAT or inheritance tax) is one contributory element, state the papers. 'However, it is important to get some sense of the cost of various changes to a particular tax as these are factors which the Minister for Finance must consider when deciding upon his broader budget package. This is particularly relevant this year because of the case being made to expand the scope of Group A to include broader family arrangements,' said the tax experts. Both Fianna Fáil and Fine Gael made a number of pledges in their election manifestos around the expansion on inheritance tax groupings. Fianna Fáil pledged to review the inheritance tax thresholds applicable when the deceased does not have children. The party also said it would increase and adjust the inheritance tax Category A, B and C thresholds in each budget 'to reflect the wider increase in property prices in the Irish economy in recent years'. Meanwhile, Fine Gael will said it would increase Capital Acquisitions Tax thresholds and raise Group A threshold (for children) to €500,000, Group B (for siblings) to €75,000, and Group C (for others) to €50,000, 'building on the progress made in Budget 2025″, it said. The tax review papers directly address whether there is discrimination at play when it comes to the differential tax treatment for direct familial relationships and more distant relationships, stating that this has existed in the Irish legal system since the foundation of the State. 'This is reflected explicitly in the Constitution, most clearly in Article 41. The current CAT legal framework, differentiating between Groups A, B and C takes account of this constitutional framework,' states the review papers, stating that it is the beneficiary of the inheritance or gift and not the person who passes away who has to pay the inheritance tax. 'In this context, it is not clear that there is a case that disponers are being discriminated against. Instead, legal concerns, if any should be viewed from the perspective of those who are liable for the tax i.e. the beneficiary. 'It should be noted that it is not clear that such concerns exist here either, as it is not uncommon for the tax system to tax people in different ways depending on the situation or their circumstances,' states the report. The Department is satisfied that the existing inheritance tax legislation and the taxation benefits are not unconstitutional or otherwise unlawful, states the review. Related Reads Financial advisor: Thinking of retiring? Here are the things to consider... Opinion: Inheritance tax changes in the budget have brought some relief, but not enough Breaking down further costings, the group looked at the cost of giving the same status to aunt, uncle and sibling relationships that currently apply to parental relationships – i.e. equalising Group A and B at a tax-free threshold of €400,000. This would cost the State €305 million based on the most up-to-date Revenue data. 'The likelihood is that in reality the costs of collating Groups A and B would be lower, but in the absence of appropriate data it is not possible to demonstrate this at this time,' it adds. Boosting €3,000 tax-free gift to your child per year The tax papers also looks at the gift threshold that parents are allowed give to their children on a yearly basis. Currently, a parent may give a gift up to the value of €3,000 to a child or anyone else each calendar year without any CAT arising. Two parents can make gifts of €3,000 each to a child, resulting in a gift to the value of €6,000 in any year free of CAT. There is no limit on the number of small gifts a person can receive in a year from different donors. The small gift exemption applies only to gifts and not to inheritances, but if government were to increase the small gift exemption, for example, in the case of giving their child help towards a deposit to buy a house by €1,000 (to €4,000) such a move would cost €0.7 million, states the paper. The cost of increasing it to €5,000 per parent is estimated to be €1.4 million, based on the number of CAT returns filed for 2023. Readers like you are keeping these stories free for everyone... A mix of advertising and supporting contributions helps keep paywalls away from valuable information like this article. Over 5,000 readers like you have already stepped up and support us with a monthly payment or a once-off donation. Learn More Support The Journal
Irish Independent
10-06-2025
- Business
- Irish Independent
PwC calls for Capital Gains Tax to be slashed to 20pc in Budget
'In our experience, the 33pc rate is deterring taxpayers from undertaking capital transactions, crystallising gains and reinvesting funds in the Irish economy,' its submission says. 'Not only would a lower rate of CGT increase capital transactions, it would also stimulate and promote the transfer of businesses to the next generation of Irish business leaders. 'It would boost Ireland's attractiveness as an investment location, because entrepreneurs consider future exit strategies when considering where to invest.' Treating the exit of a shareholder from a business as a CGT event, rather than one subject to income tax – which is levied at a higher rate – would achieve this objective, PwC says. It claims many Irish business owners face challenges in securing a smooth exit when they decide to leave. The tax bill inhibits the exit of a shareholder that would allow the incumbent to take over the reins. 'We are seeing instances where fully exiting shareholders are subject to taxation at marginal income tax rates, which can have the unintended consequence of making many bona fide transactions, such as management buy-outs, unviable,' the consultancy's pre-Budget submission says. We have seen Irish businesses opting to sell to external and often non-Irish third parties 'In some cases, we have seen Irish businesses opting to sell to external and often non-Irish third parties (eg private equity funds) to secure a tax-efficient exit, as opposed to passing it on to emerging Irish business leaders, often working within the business being sold.' It points out that both the annual CGT exemption of €1,270, as well as the Capital Acquisitions Tax small gift exemption of €3,000, have not been changed for several decades. As neither has been brought in line with inflation, PwC is proposing both exemptions be increased in the Budget. The company says tax policy could also play a vital role in addressing the housing shortage. 'Soft costs' of construction, such as taxes, can be easier to change quickly than 'hard costs', such as labour and materials, PwC argues. Among the tax measures it suggests is a reduction of the CGT rate when investment properties are sold, if they have been retrofitted. This would increase the attractiveness of retrofitting old property stock, and would also contribute towards Ireland meeting its sustainability targets. PwC says the most pressing issue is to change the Residential Zoned Land Tax (RZLT), which was introduced as a land activation measure. The tax is levied on serviced land which has the potential to provide residential housing, but is not being used for that purpose. Where there is a change in ownership of land before it is fully developed, some RZLT deferrals are clawed back. 'Given the increasing popularity of the forward-fund model, particularly with approved housing bodies and other public sector bodies, one significant improvement would be for such transactions to be exempt from clawback provisions,' PwC says. According to new figures from Revenue, approximately 1,800 RZLT returns have been filed to date, with liabilities of almost €40m paid. This is the first year in which a charge arises. In the days leading up to the filing deadline of May 30, Revenue saw a notable increase in the number of site owners registering for RZLT and filing a return. Surcharges, ranging from 10pc to 30pc of the annual liability, apply to late RZLT returns.
Irish Examiner
06-05-2025
- Business
- Irish Examiner
Farmers urged to review structures as Revenue tightens rules on CAT relief
Farmers have been warned to have their affairs in order, or risk being innocent victims of a Revenue clampdown on non-farmers availing of agricultural relief from Capital Acquisitions Tax. The Land Mobility Service has warned of tightening rules around farm transfers, which may make qualification for agricultural relief from CAT more difficult. To qualify for the relief, the recipient in a land transfer must be an active farmer, or lease to an active farmer, for six years from receipt of the farm asset. Upon receipt of the farm asset, 80% of the recipient's total assets must be agricultural. And the disposer who transfers the land must have actively farmed, or leased to an active farmer, in the six years prior to disposal. CAT applies at 33% of the asset value of gifts and inheritances. Missing out on the agricultural relief can be very costly, because the relief reduces agricultural asset value by 90%, for CAT calculation purposes. There are a number of other exemptions, reliefs, and thresholds which can reduce a CAT liability. For example, cumulative CAT-exempt transfer thresholds apply, such as €400,000 from parent to child; €40,000 to brother, sister, niece, nephew, or linear descendant; and €20,000 to others. Now, the active farmer requirement is becoming an issue, according to the Land Mobility Service. Previously, more or less anyone with a herd or tillage number and submitting a farming income in their annual tax returns was considered an active farmer. These requirements will still apply, together with probably a BISS application. "However, there are now so many different farming operating structures, and part-time farmers, those without a farming qualification may have to prove at least 50% of their time is spent farming," according to the Land Mobility Service. While persons in share farm or farm partnership arrangements are generally active farmers, those operating farm companies may not be active farmers themselves, the owner and the company are two separate entities. Proper Revenue-stamped leases may be required between the owner and the farmer company. The farm operating structure may need to be looked at, partnership arrangements are generally better suited to succession planning and inheritance tax. Tighter agricultural relief rules also bring consequences for those leasing out. They need to be certain they have a proper lease to a qualifying active farmer. Questions that arise include if that person or entity has an agricultural qualification? If not, is the person or entity farming 50% of their time (have they a herd number, tillage number, tax number, tax returns?) Have you a Revenue Stamp Certificate for the lease? Land and farm leases are required to be registered and stamped by the Revenue. As part of farm cross-compliance, scheme access, herd number applications, and herd status changes (adding a person, forming a partnership, forming a company), the Department of Agriculture requires Stamp Certs for all leases. These are some of the important questions for a retiring farmer, who wants to eventually qualify for agricultural relief when transferring the farm. The Land Mobility Service advice for 'Non-Farming Land Owners' is to either farm themselves (which can be effected through share farming or partnerships) or lease to an active farmer for at least six years. If there are Agricultural Relief problems, Business Relief is an option. Business Relief applies to the transfer of a business; the transfer of a share in a business; or the transfer of shares in a company carrying on a business. Minimum periods of ownership and operation before and after transfer apply, typically six years. A Macra na Feirme and FBD Trust initiative, the Land Mobility Generational Renewal, Facilitation and Support Service (to give it its full name) is a subsidised, independent expert service facilitating collaborative farming arrangements such as long leases, share farming, and partnerships. This provides options for landowners and opportunities for young trained farmers, and for any farmers and farm families contemplating expansion, changing enterprises, or stepping back. The confidential service allows people to explore their options, and will help match landowners with farmers interested in long leases and collaborative arrangements such as partnerships or share farming, within or outside the family. The Land Mobility Service urges farm families and landowners to ask themselves: "Who will be farming the farm in five years' time?". If they cannot answer this question, it is time to explore and evaluate options, and the Land Mobility Service is there to help. Read More Farm Legal Advice: Getting your farm succession right
Agriland
01-05-2025
- Business
- Agriland
Finance minister outlines tax laws for retiring farmers
The Minister for Finance, Paschal Donohoe has highlighted how Ireland is implementing recommendations from the Commission on Taxation and Welfare report about retirement relief for farmers. The minister was responding to a parliamentary question from Social Democrats TD, Cian O'Callaghan on Tuesday (April 29). Deputy O'Callaghan asked the minister for an update on the department's plans to implement the recommendations made in the report. Minister Donohoe explained that the commission was asked to consider how the taxation and welfare systems can support economic activity, while ensuring there are sufficient resources available to cover the costs of public services. He said: 'The (report) the deputy is referring to provides a range of recommendations in relation to Capital Gains Tax (CGT) and Capital Acquisitions Tax (CAT). A number of those recommendations have been enacted in legislation. 'The commission recommended that a lifetime limit be introduced on retirement relief on the disposal of businesses and farms to the children of individuals who are disposing of such assets. 'As there was previously no lifetime limit in place to those receiving retirement relief from those assets disposed of by parents aged 55 to 65 to their children, the commission maintained that a cap should be introduced for the purposes of promoting fiscal sustainability and equity.' According to the minister, the Finance (No. 2) Act 2023 introduced the cap. It states that for disposals to a child made on or after January 1, 2025, a lifetime limit of €10 million generally applies to the market value of the qualifying assets to which retirement relief applies. A €3 million cap applies to disposals of qualifying assets by individuals aged 70 years and over. Minister for Finance Minister Donohoe also outlined that the Finance Act 2024 provides CGT liability on transfers that exceed the €10 million lifetime limit, made to a child on or after January 1, 2025. This may be deferred by the individual making the transfer. CGT liability that arises to an individual on the transfer of qualifying assets to a child on or after January 1, 2025, the value of which exceeds the €10 million lifetime limit. Minister Donohoe said: 'Further recommendations made by the commission in this chapter are under review by my officials on an ongoing basis. 'The commission clearly set out in its report that the recommendations are not intended to be implemented all at once, but rather provide a clear direction of travel for future governments around how the sustainability of the taxation and welfare systems may be improved,' he added.
