Key Post When is CAT on inheritances due?

[Brendan Burgess]

I am trying to get my head around this and simplify it as far as possible. Corrections welcome.

In most cases, the due date is determined by the date probate is granted.

If probate is granted between 1 January and 31 August, you must file a return and pay the CAT by 31 October that year.

If probate is granted between 1 September and 31 December , you must file a return and pay by 31 October the following year.

 

[Brendan Burgess]

Revenue's terminology is confusing.

The Date of an Inheritance is the date of death. This determines the CAT rate and the CAT threshold which apply. Note: The valuation at the date of death is not relevant in the vast majority of cases. The most usual valuation is the valuation at the date Probate is granted.

The Valuation Date

• is the date on which the inheritance is valued for CAT purposes
• It determines when the CAT return must be made and the CAT paid

Different parts of an inheritance can have different Valuation Dates

The Valuation Date is the date that Probate is granted, except in the following circumstances:

The Valuation Date is the date of death

• when the property is jointly owned and the survivor inherits the property
• The property being inherited is being occupied by the beneficiary.

When the will dictates that a property is to be sold and the proceeds distributed

• The valuation date is the date the property is sold which could be a few years after the date of death

 

[Brendan Burgess]

Revenue's explanation

What is the valuation date?​

The valuation date is the date on which the market value of a gift or inheritance is established. The market value is the best price you would get if you sold the item on the open market. The valuation date also determines the date by which a return must be filed and tax must be paid.

The valuation date for a gift is generally the date you receive it. The valuation date for an inheritance is the earliest of the following dates:

• the date the executor or administrator is entitled to retain the asset for your benefit
• the date on which the asset is retained
• or
• the date the executor or administrator gives the asset to you.

What does "the date the Executor is entitled to retain" mean?

It means the date when the Executor is free to give it to the beneficiary.

The Executor cannot distribute the estate until Probate is granted so that is usually the date.

 

[Brendan Burgess]

Examples for determining Valuation Dates

1. A woman leaves her home and cash equally between her three children.

The Valuation Date is the date of Grant of Probate.

It doesn't matter when the Executor actually transfers the property over to their joint names.

2. The will specifies that her home is sold and that the proceeds be distributed between the three children.

The Valuation Date is the date that the property is sold.

 

[Brendan Burgess]

What happens if Probate is granted and the Executor is slow in distributing the estate?

For example:
Probate granted 1 June 2023
Valuation date: 1 June 2023
CAT due to be paid by 31 October 2023
Executor doesn't get around to distributing the estate until January 2024

 

[Brendan Burgess]

If a property has to be sold to pay the CAT

A woman leaves her home to her son leaving him with a CAT liability of €200k.

He decides to sell the house but it takes time to sell the house and he misses the October 31 deadline.

Revenue understands this and will charge interest on the unpaid liability.

However, the son should make a return on time even if he can't pay the tax.

 

[Brendan Burgess]

In what circumstances is Capital Gains Tax payable by the Executor/Estate?

If the Executor sells the property and distributes the proceeds, the Executor will be liable for Capital Gains Tax on the increase in value from the date of the Grant of Probate to the date of sale.

Example:
Sales proceeds: €400k
Valuation at date of Grant of Probate: €300k
Capital Gain: €100k
CGT payable by Executor: €33k

The beneficiaries pay Capital Acquisitions Tax based on the €300k valuation as of the date of Grant of Probate although they actually receive €367k ( €400k - €33k)

Check: Is my understanding correct?

If the will specified that the property be sold and the proceeds distributed, then there is no CGT. The Valuation Date is the date the property was sold and CAT is based on the €400k proceeds.