Inheritance Tax Ireland Advice

Increases in estate values and a general trend of reduction in inheritance tax thresholds in recent years have combined to mean that Inheritance Tax is no longer a problem only for the wealthy of Irish society, it is also a potential problem for middle class Ireland.

Capital Acquisitions Tax (CAT) is the tax charged when a gift or inheritance is received. CAT comprises two separate taxes – a Gift Tax payable on lifetime gifts and an Inheritance Tax payable on inheritances received on a death.

How to Plan for Inheritance Tax – Life Assurance Section 72 Relief

To encourage people to plan ahead and to have cash available to pay Inheritance Tax when they die relief is available on certain life assurance plans. This relief was introduced by Section 60 of the 1985 Finance Act to allow people to plan for the payment in a tax efficient manner. The legislation is now contained in Section 72 of the CAT Consolidation Act 2003.

The Relief provides that where a life assurance policy is put in place to provide for the payment of Inheritance Tax, Revenue will not seek to tax the policy proceeds as long as the money is used to pay Inheritance Tax arising on the death of the lives assured under the policy, provided certain conditions are met.

A Section 72 life assurance policy effectively gives you an option – rather than letting tax legislation decide how your estate will be distributed – you can pass on your assets in the way you wish – and plan for the tax consequences.

Who is Liable for this Tax in Ireland?

Gifts and inheritances can be received tax-free up to a certain amount. The tax-free amount, or threshold, varies depending on your relationship to the person giving the benefit. There are three different categories or groups. Each has a threshold that applies to the total benefits you have received in that category since 5 December 1991.

Group A applies where the beneficiary, the person receiving the benefit, is a child of the person giving it. This includes a stepchild or an adopted child.

It can also include a foster child if the foster child resided with and was under the care of the disponer and they provided the care, at their expense, for a period or periods totalling at least 5 years before the foster child reached the age of 18. This minimum period does not apply in the case of an inheritance taken on the date of death of the disponer. In this case the Group A threshold will apply provided that the foster child had been placed in the care of the disponer prior to that date.

Group A also applies to parents who take an inheritance from their child but only where the parent takes full and complete ownership of the inheritance. If a parent receives an inheritance where they do not have full and complete ownership of the benefit, or if a parent receives a gift, then Group B applies.

If a parent inherits from their child, and they have full and complete ownership of the inheritance it is exempt from tax if, in the previous five years, the child took an inheritance or gift from either parent and it was not exempt from Capital Acquisitions Tax. In this case, no tax needs to be paid even if the inheritance from the child is over the threshold.

Group B applies where the beneficiary is the:

  • Parent – see also Group A above
  • Grandparent
  • Grandchild or great-grandchild – see below
  • Brother or sister
  • Nephew or niece of the giver – see below

If a grandchild is a minor (under 18 years of age) and takes a gift or inheritance from their grandparent Group A may apply if the grandchild’s parent is deceased.

Group A may apply to a nephew or niece if they have worked in the business of the person giving the benefit for the previous five years and meets the following criteria:

  • The nephew or niece must be a blood relation rather than a nephew or niece-in-law
  • The gift or inheritance consists of property used in connection with the business, including farming, or of shares in the company.
  • If the gift or inheritance consists of property then the nephew or niece must work more than 24 hours a week for the disponer at a place where the business is carried on, or for the company if the gift or inheritance is shares. But if the business is carried on exclusively by the disponer, their spouse and the nephew or niece then the requirement is that the nephew or niece work more than 15 hours a week.
  • The relief does not apply if the benefit is taken under a discretionary trust.

Group C applies to any relationship not included in Group A or Group B.

If you receive a benefit from a relation of your deceased spouse or civil partner, you can be assessed with the same group as your spouse or civil partner would have been if they were receiving the benefit from their relation. For example, if you receive a benefit from the father of your spouse or civil partner, the group threshold would be Group C. But if you receive a benefit from the father of your spouse or civil partner and your spouse or civil partner is deceased, then the group threshold that applies to you would be the same as for a child receiving a benefit from a parent, Group A.

CAT Rates

For new gifts and inheritances received on or after 5th December 2001 tax is calculated according to the total of all gifts and inheritances received from all sources since 5th December, 1991.

The following CAT Tax Rate currently applies:

Tax Rate
Group Threshold Nil
Balance 33%

CAT Thresholds

The Group threshold amounts vary depending on the relationship between the beneficiary and the disponer.

GROUP A €335,000 Applies where the beneficiary is a child (including adopted child, step-child and certain foster children) or minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an inheritance of an absolute interest from a child.

GROUP B €32,500 Applies where the beneficiary is a brother, sister, niece, nephew or lineal ancestor or lineal descendant of the disponer.

GROUP C €16,250 All other cases.

The table below highlights the decrease in thresholds since 2009.


Capital Acquisitions Tax – How Much and by who?

CAT Receipt Tax

Source – Department of Finance and Revenue