The €3,000 annual small gift exemption should be abolished

The CAT thresholds are determined by the recipient and their relationship to the donor.

So a person can get a total of €335k from both their parents.

They can get €32,500 in total from their uncles and aunts and others in Group B

Brendan

The Horseman said:

I am at a loss why you are even considering this.

By effectively removing this exemption you want to give more tax to Revenue. Removal of these type of incentives act to discourage people trying to better themselves.

Why better yourself to work hard, do without to help your family etc. Remember this exemption when used is used by the ordinary person.

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I don’t think any of Brendan’s suggestions are intended to raise extra tax.

On this one you could get rid of the €3k exemption, but increase the Group A threshold to whatever level means the change is tax revenue neutral. That way everybody gets an equal opportunity to benefit from this exemption, rather than just the wealthy.

Zenith63 said:

I don’t think any of Brendan’s suggestions are intended to raise extra tax.

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That is my general principle.

However, some of the CAT ones are so wrong that I think I would say that more tax should be raised from CAT.

I agree with the idea of a small gift exemption - but unfortunately it is being used to effectively increase tax-free thresholds by €180k which was not the intention.

Brendan

Sorry Brendan. Are you saying that a person can get 335 from both parent's.
That is news to me.

Aurora said:

Sorry Brendan. Are you saying that a person can get 335 from both parent's.
That is news to me.

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No, one parent

Zenith63 said:

I don’t think any of Brendan’s suggestions are intended to raise extra tax.

On this one you could get rid of the €3k exemption, but increase the Group A threshold to whatever level means the change is tax revenue neutral. That way everybody gets an equal opportunity to benefit from this exemption, rather than just the wealthy.

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But that's exactly what will happen. In the majority of cases it is normally parent to child who receive inheritances.

If you remove the €3k and increase the group A threshold what figure to you increase it too? If its less than €75k (birth of a child until 25 yrs old when they have finished college and started working) then yes you are increasing the tax take by Revenue. With prices raising in "real terms" the €3k is not worth what it was in the past as it is.

With smaller average family sizes, it is not unusual to see people in their mid 50's with assets exceeding 600k (by the time they reach retirement) be it the family, life assurance policies, savings and investments.

The threshold limits (certainly the A threshold) were reduced significantly and have not taken any account of raising property prices.

The Horseman said:

But that's exactly what will happen. In the majority of cases it is normally parent to child who receive inheritances.

If you remove the €3k and increase the group A threshold what figure to you increase it too? If its less than €75k (birth of a child until 25 yrs old when they have finished college and started working) then yes you are increasing the tax take by Revenue. With prices raising in "real terms" the €3k is not worth what it was in the past as it is.

With smaller average family sizes, it is not unusual to see people in their mid 50's with assets exceeding 600k (by the time they reach retirement) be it the family, life assurance policies, savings and investments.

The threshold limits (certainly the A threshold) were reduced significantly and have not taken any account of raising property prices.

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Not sure I understand your objection sorry. If Revenue are instructed to increase the Group A threshold by whatever amount they believe would lead to a tax revenue neutral position after the €3k exemption is cancelled, they are by definition not collecting extra tax. No?

I’m not sure what the new threshold would be, but I imagine the boffins in Revenue have a good sense of how widely used the €3k exemption is and could figure it out. It may well be an extra €25-50k per person.

The Group A threshold having not increased as property prices have is something that should be addressed, but is irrelevant to a discussion about wealthy individuals using the €3k exemption to increase their tax free inheritance allowances.

Zenith63 said:

Not sure I understand your objection sorry. If Revenue are instructed to increase the Group A threshold by whatever amount they believe would lead to a tax revenue neutral position after the €3k exemption is cancelled, they are by definition not collecting extra tax. No?

I’m not sure what the new threshold would be, but I imagine the boffins in Revenue have a good sense of how widely used the €3k exemption is and could figure it out. It may well be an extra €25-50k per person.

The Group A threshold having not increased as property prices have is something that should be addressed, but is irrelevant to a discussion about wealthy individuals using the €3k exemption to increase their tax free inheritance allowances.

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What about those people who use the 3k exemption who have no children? Or those who want to help family members over and above the Group b threshold for example. What about child to parent to help cover there day to day expenses? Revenue will collect extra tax in these situations.

With such low thresholds the 3k allows people reduce their tax liability. With the increased use of electronic payment methods even down to weekly shopping it has never been easier to see exactly who is paying for items. In the recent past physical cash was easy to give to others with no trace of its origin.

This thread is not about wealthy individuals using the small gift exemption. Wealthy individuals will use tax experts to reduce their tax liability.

The Horseman said:

What about those people who use the 3k exemption who have no children? Or those who want to help family members over and above the Group b threshold for example. What about child to parent to help cover there day to day expenses? Revenue will collect extra tax in these situations.

With such low thresholds the 3k allows people reduce their tax liability. With the increased use of electronic payment methods even down to weekly shopping it has never been easier to see exactly who is paying for items. In the recent past physical cash was easy to give to others with no trace of its origin.

This thread is not about wealthy individuals using the small gift exemption. Wealthy individuals will use tax experts to reduce their tax liability.

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With respect, the thread is about that, have a look at the first post again.

To your other points, I have no problem with the Group B/C thresholds being increased as well, again throw it into the calculations with the requirement that the whole thing works out tax revenue neutral.

The purpose is not for Revenue to collect more tax or to collect more tax from the less wealthy, so the thresholds would be restructured to ensure this. Again I’m not sure I understand your objection, unless you’re one of the wealthy individuals using the €3k exemption for the purposes outlined above, you’ll be getting a greater ability to pass on wealth tax free because your allowance is no longer use-it-or-lose-it at a time when most average people don’t have it to give.

This is not a money grab from the rich, it’s correcting something that means the more money you have the less tax you pay.

Zenith63 said:

With respect, the thread is about that, have a look at the first post again.

To your other points, I have no problem with the Group B/C thresholds being increased as well, again throw it into the calculations with the requirement that the whole thing works out tax revenue neutral.

The purpose is not for Revenue to collect more tax or to collect more tax from the less wealthy, so the thresholds would be restructured to ensure this. Again I’m not sure I understand your objection, unless you’re one of the wealthy individuals using the €3k exemption for the purposes outlined above, you’ll be getting a greater ability to pass on wealth tax free because your allowance is no longer use-it-or-lose-it at a time when most average people don’t have it to give.

This is not a money grab from the rich, it’s correcting something that means the more money you have the less tax you pay.

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It is a money grab by Revenue and it is not tax neutral on the individuals it impacts on.

If you want a fairer system then my suggestion is to give individuals a lifetime threshold to do with as they please and remove the groupings altogether. If you are a couple/married then you get a combined lifetime threshold similar to joint assessment for income tax purposes each year.

Also link the thresholds to at a min inflation rather than some arbitrary figs.

If the small gift exemption is abolished then all gifts from a parent to an adult child, or from a grandparent to a child or from an adult child to a parent should be accounted for and collated until the CAT limit is reached and tax paid on every gift after that.

This would be an inordinate administrative burden on everyone so it is not surprising that the revenue have set a reasonable annual limit. With adult children it is pretty easy to spend €3K on gifts to them if you have the disposable income to spend. A parent might decide to pay for health insurance €1K, car insurance €1K, a family holiday €1K, Christmas, birthday, a concert, a few meals out, a piece of jewellery, etc., etc. it adds up really fast.

I still don’t understand posters who say revenue are not interested in substantial gifts to pay for weddings, house deposits, cars, paying for that masters etc. if you have received a gift above the limit the onus is on you to report this to revenue and pay the tax.

Surely parents giving young adults €3K per year to allow savings for big life events, say in the first 7-10 years of their working life where cash can be very tight is not morally wrong. And as the parents age I would expect the gift to flow the other way from the child to the parent.

If you start taxing things below €3k, there’ll just be widespread evasion.

The Horseman said:

What about those people who use the 3k exemption who have no children? Or those who want to help family members over and above the Group b threshold for example. What about child to parent to help cover there day to day expenses? Revenue will collect extra tax in these situations.

With such low thresholds the 3k allows people reduce their tax liability. With the increased use of electronic payment methods even down to weekly shopping it has never been easier to see exactly who is paying for items. In the recent past physical cash was easy to give to others with no trace of its origin.

This thread is not about wealthy individuals using the small gift exemption. Wealthy individuals will use tax experts to reduce their tax liability.

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What do you define as "wealthy individuals"?

A good citizen already has to track what they give annually to make sure they don’t go over the €3k, and they have to track over the long term instances where they do go over it for the lifetime limits. Are we sure in the Information Age the extra administrative burden is quite the Hurculean being suggested?

noproblem said:

What do you define as "wealthy individuals"?

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Most people define them as "the guys who have more than me".

noproblem said:

What do you define as "wealthy individuals"?

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Any person or couple with assets over 500k and to clarify the 500k is the value the person/couple own and don't owe money on. Eg outstanding mortgage etc.

The Horseman said:

Any person or couple with assets over 500k and to clarify the 500k is the value the person/couple own and don't owe money on. Eg outstanding mortgage etc.

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Most people with net wealth in the €500k-€1m range would benefit from this change. At that kind of wealth you’re unlikely to be able to give €6k to each child since birth, or their spouse and grandkids in later life. You’ll need to hold on to it in your pension to be sure you have money to live on in old age, and you’ll leave it to your child/children but will now have maybe a €400k GroupA allowance instead of €335k.

Zenith63 said:

Most people with net wealth in the €500k-€1m range would benefit from this change. At that kind of wealth you’re unlikely to be able to give €6k to each child since birth, or their spouse and grandkids in later life. You’ll need to hold on to it in your pension to be sure you have money to live on in old age, and you’ll leave it to your child/children but will now have maybe a €400k GroupA allowance instead of €335k.

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Not necessarily, what about adult child to elderly parent? What about rent free accommodation to relatives either saving for deposits, relationship breakdown? What about childless people?

I am regularly asked about this topic. I am a qualified finance professional but am not in practice and have a basic understanding of taxation.

Friends in the squeezed middle regularly reference their frustration to me at the tax system and see this as going some way at mitigating the situation.

How many people apart from the wealthy passing on their wealth use the small gift exemption. I have 2 children aged 20 and 21. What constitutes a gift paying for college accommodation, living expenses, driving lessons, car insurance etc. Would easily cost me over 3k each per yr but dont record any of it as a gift.

Aurora said:

Sorry Brendan. Are you saying that a person can get 335 from both parent's.
That is news to me.

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Group thresholds​

Each group has a tax-free threshold amount that apply from 7 December 2011.

The threshold is cumulative and applies to the total taxable benefits you have received in that group. (You must include the taxable value of any previous gifts and inheritances received since 5 December 1991 in the same group.)

You only pay tax on the value of a gift or inheritance above the tax-free group threshold amount.

Tax-free thresholds