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Paraic Madigan outlines the Finance Act 2000 changes
Position Prior to Finance Act 2000
Capital Acquisitions Tax (CAT) is an integrated gift and inheritance tax which was introduced in Ireland in 1976. It is a beneficiary-based tax system with each beneficiary having primary responsibility for payment CAT on the gift or inheritance received. Beneficiaries are taxed when they become entitled in possession to a benefit. Agents including personal representatives, trustees and professional advisors are secondarily accountable for the payment of CAT in relation to assets which they have had under their control at any time.
Each beneficiary has certain exempt thresholds which vary depending on the relationship between a disponer and the beneficiary. There is a complex system of aggregation requiring that benefits taken over a specified period will be taken into account in calculating the exempt threshold (if any) which applies to the current benefit.
The marginal rates of tax have for some years been 40%o in the case of inheritances and 30% in the case of gifts.
Since its introduction in 1976 Ireland has charged CAT on the basis of:
1. The domicile of the disponer being Irish or
2. The property which is the subject matter of a gift or inheritance having its situs in Ireland.
The rules for taxing discretionary settlements provide that a discretionary settlement made by a non-domiciled disponer would come within the charge to CAT in respect of any benefits taken from the settlement on or after the date when the disponer became domiciled in Ireland. This is so even if the settlor was non-domiciled at the date when the settlement was created. This provision does not apply to fixed interest settlements.
Finance Act 2000
The Minister for Finance in his Budget speech on 1 December 1999 announced significant changes to the rates of tax and the basis of charge and these items have been addressed in Finance Act 2000.
The Minister announced a radical shift in the basis of charge to CAT He proposed that with immediate effect the basis of charge would shift to the residence/ordinary residence in Ireland of either the disponer or the beneficiary.
The Minister introduced increases in the exempt thresholds to 300,000 for group 1 benefits (parent to child), 30,000...