Small Gifts Exemption- Direct and Indirect gifts

S

SquirrelChaser

Guest
So the small gifts exemption is currently at €3k and anything above that from a single individual during a calendar year is subject to the CAT rules. The exemption applies to any number of donors, so if you have a large circle of generous family & friends, you could theoretically receive €3k a year from 20 different people entirely tax free.

My question is, what rules are in place to either prevent abuse of the exemption and also to prevent people from being caught in the CAT net who ought not to be.

So say I have a large amount of money which I want to give to my child, but I don't want them to pay any tax on it. What's to prevent me from recruiting 50 of my most trustworthy family/friends/acquaintances and paying them €3k each every year for 20 years on the (completely unrecorded) agreement that they gift that to my child. Or better yet, I give each of 50 children of my 50 wealthiest family/friends/acquaintances €3k a year for 20 years while each of them pays the same to my child. Thus giving my child €3 million over 20 years totally tax free.
  • This is totally ridiculous, and I assume/hope there are rules to prevent such blatant abuse.
Conversely, if I'm already putting away €50 a week for my child's future and my spouse wants to give €50 themselves on top of that, and the most convenient way to do that is give me the €50 and for me to put in my child's own account along with my own €50. €100 a week puts my child over the threshold, even though half the money comes from my spouse, so after 20 years a €200k chunk of my child's CAT threshold is eaten away, potentially costing them €67k or so.
  • This is equally ridiculous, and I'm hoping/assuming there are rules to prevent this also.

Has anyone any knowledge of the rules which apply in these circumstances? I don't have €150k a year to send on an indirect route to my child unfortunately, so it's the second situation I'm looking at.

Thanks.
 
AFAIK Revenue have the power to 'look through' any transaction which is undertaken purely to avoid tax.

While I doubt Revenue are interest in your 100e a week, and would almost certainly accept , 'its from both of us', get your spouse to give her 50e directly, then you don't have to worry about it.
 
cremeegg said:
AFAIK Revenue have the power to 'look through' any transaction which is undertaken purely to avoid tax.

While I doubt Revenue are interest in your 100e a week, and would almost certainly accept , 'its from both of us', get your spouse to give her 50e directly, then you don't have to worry about it.
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It's administratively impossible for the product we have apparently. It probably seemed irrelevant at the time when it was set up cause we didn't have or expect to have the spare cash laying around to go over the exemption threshold. (I say probably because I've no memory of being told it was impossible at the time, but that probably just reflects my poor memory). Happily our financial circumstances have improved significantly in the meantime.

I've put in a query to Revenue via ROS. Unless they're very clear in their response that the small gift exemptions from myself and my spouse can be aggregated then we'll formulate a plan B. Plan B is probably going to require a significant amount of paperwork but anyhow, that's what I get for not having putting in place a contingency for having more money than I expected!
 
SquirrelChaser said:
I've put in a query to Revenue via ROS. Unless they're very clear in their response
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Even if you get a clear response from them you can't bank on it being correct/authoritative/comprehensive and if you act on incorrect information that they provided then they will not accept that as a defence for any mistakes that you make. If you really want to pursue this then you need to get professional tax advice. Seems like overkill to me though.
 
ClubMan said:
Even if you get a clear response from them you can't bank on it being correct/authoritative/comprehensive and if you act on incorrect information that they provided then they will not accept that as a defence for any mistakes that you make. If you really want to pursue this then you need to get professional tax advice. Seems like overkill to me though.
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Good point.

Paperwork it is so!
 
Shouldn't need to be tons of paperwork - presuming you have a joint account you can have the money go from there to the childs account and you are sorted.
 
When A gifts to B who gifts to C there’s a specific rule that deems the onward gift to C to originate from A.
 
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