Transferring or Gifting Assets – Things to Remember!
Are you one of the thousands of individuals that got bitten by the Celtic Tiger and decided to buy a second property? Thousands of people purchased property for investment purposes to either, sell in the future to generate extra cash on retirement or to have something to transfer/gift to their children.
Day after day, we hear that property values are at an all-time low. If this is the case, we need to consider is now the time to consider Transferring those assets to the next generation?
When you gift/transfer an asset to a child or another person, it is seen as a ‘deemed disposal’ in the eye of the Revenue, and capital gains tax or capital acquisitions tax has to be paid accordingly. I have set out below important dates and reporting requirements set by the Revenue.
Payment dates for disposals of assets in 2013 are as follows:
i) If the disposal is made in the period 1 January 2013 to 30 November 2013, the tax is due on or before 15 December 2013.
ii) If the disposal is made in the period 1 December 2013 to 31 December 2013, the tax is due on or before 31 January 2014.
Although the payment of CGT that arose on disposals in 2012 would have been in December 2012 and January 2013, the reporting of these disposals or any acquisitions is not until the filling deadline of 31 October 2013. Such disposals or acquisitions must be included in a taxpayer’s income tax return.
The Form CG1 should be completed by persons who make disposals of assets during the year and who are not obliged to submit an income tax return i.e. employees with no other income or individuals exempt form income tax.
Capital Acquisition Tax (‘CAT’) – Gift/Inheritance Tax
The pay and file date for CAT where the valuation date arises between;
i) 1 January 2012 to 31 August 2012 is 31 October 2012 and
ii) 1 September 2012 to 31 August 2013 is 31 October 2013.
These rules mean that CAT could be due as soon as two months from the valuation date, in some cases, and up to 14 months from it, in others. In the case of gifts, the date of the gift can be very important from a cash-flow perspective.
The valuation date determines the date on which the return must be filed and any liability paid. The date of the gift or date of inheritance determines the threshold value and the rate of CAT to be applied.
Example 1
Colleagues, Ann and Barry, jointly own a property.
Ann decides to gift Barry her half of the property on 30 August 2013. The valuation of the property at the date of the gift is €300,000. Barry must pay his CAT of €43,535 by 31 October 2013.
If Ann waited and gifted the property on 1 September 2013, the payment would not be due until 31 October 2014.
Revenue will issue a Form IT38 to individuals who it understands may have a requirement to pay and file a CAT return in a tax year. However, the obligation to pay and file a return rests with the taxpayer, whether or not a notification to file is sent to them by the Revenue.
Conclusion
Taxpayers need to be very attentive to various deadlines and to discuss them with their tax consultants. Failing to meet the required reporting and payment dates can leave you exposed to significant penalties and interest charges.
Irishtaxback.ie specialises in structuring capital transactions to reduce the CGT and CAT liability, while ensuring that the goals of the client remain unaffected. We can also advise on all aspects of gifts/transfers and assist in planning the transfer of wealth to the next generation by identifying all assets that qualify for tax reliefs.
Currently there are a number of different reliefs available to certain individual who are disposing of assets or receiving gifts/inheritance. If you are one of those individuals and require further information please contact a member of our team and we will be happy to discuss your options.
