Can a disponer "look after" the CAT for the beneficiary?

Brendan Burgess

Brendan Burgess

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I was told this today by someone who would do their research and would check it out with an accountant anyway.

Assume that the lifetime thresholds and small gifts have been used up.

He said that if the disponer wants to give €100k net to a beneficiary - he can give them €100k and pay the €33k CAT as well.

I told them that they were wrong.

I said that this was simply a gift of €133k and therefore the CAT should be €43,890.

Brendan
 
Brendan Burgess said:
I said that this was simply a gift of €133k and therefore the CAT should be €43,890.
Click to expand...

That's right.

Assuming no insurance policy, the taxable value would be recalculated as the gift + the CAT due.

This would then be subject to CAT @ 33%.

The disponer would gift €100k to the beneficiary and €43,890 would be due to Revenue

Per Revenue Guidance here:

"Section 87 CATCA 2003 provides that where a disponer directs that a gift or an inheritance is to be taken by a beneficiary ‘free of tax’, the benefit taken is deemed to include the amount of CAT on the gift or inheritance but does not include further CAT on the additional CAT that would otherwise have been payable. In effect, the benefit taken by the beneficiary is increased by including the tax on the gift or inheritance as an additional benefit. For the purposes of calculating the CAT due, the beneficiary is regarded as taking two benefits; i.e. the amount of the gift or inheritance itself and the tax payable in respect of that gift or inheritance."
 
@AAAContributor - that is very interesting and very confusing. This is probably what he was quoting.

Let's break it down.

the benefit taken is deemed to include the amount of CAT on the gift or inheritance but does not include further CAT on the additional CAT that would otherwise have been payable.

I direct that Johnny gets €100k net in my will.
The CAT on that is 33k.

The benefit taken is deemed to include the amount of CAT , so the Benefit is €133k
So the CAT is €43,890 - payable by the estate?

but does not include further CAT on the additional CAT that would otherwise have been payable.

So the estate had paid out €143,890
The 33% tax is €47,483
But Johnny has received €100k.

I must admit I am lost.
 
There is a box on the Form IT38 CAT Return which the beneficiary must tick if the disponer is paying the CAT bill.

I assume it recalculates the tax liability accordingly in that event.
 
Brendan Burgess said:
I direct that Johnny gets €100k net in my will.
The CAT on that is 33k.
Click to expand...

I don't think that's correct.

There is the tax part of the gift (33%) and the non-tax part (67%). If the 100k is NET, then the 100k is the 67%. You therefore need to gross up to calculate the 100%. 100k/0.67 = 149253. 100k non-tax + 49253 tax is the total gift.
 
Brendan is correct, per the Revenue advice.

CAT paid by the disponer​

The disponer may pay the tax due on your gift or inheritance. In this case, your gift or inheritance amount increases by the amount of tax the disponer paid.

  • Example
    Eric receives a gift of €100,000 and John, the disponer, pays the tax. This is considered a further benefit. The final tax due will include the tax payable on the gift of €100,000.
    If Eric has used up his entire available threshold, the tax on €100,000 at 33% is €33,000. Eric is now considered to have taken a gift of €133,000. The tax is recalculated on €133,000, giving a final amount of tax due of €43,890, which John pays.
 
OK, so let's say I give Zag a gift of €147,483 - and tell him to pay his own CAT.

Zag pays €48,669 CAT , leaving him with €98,813.

However, if I give Zag €100k net and agree to pay the CAT.
Zag will be deemed to have received a gift of €133k
And I will pay €43,890 CAT

So the cost to me will be €143,890.

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