AITI Chartered Tax Adviser

Pass assets tax-efficiently

Gift/inheritance tax on cash, shares and investment property applies at 33% on any value received in excess of the threshold (€335,000 for a child from a parent: CATCA 2003 Sch 2).

However the tax system discriminates in favour of farming (CATCA 2003 s 89) and business assets (CATCA 2003 s 92) – the effective rate of tax on passing such assets is 3.3% (a 90% reduction).

For example a rental property is taxed at 33% but an accommodation business (e.g., a hotel or B & B) is taxed at 3.3% subject to meeting the conditions.

To qualify for the effective 3.3% rate the recipient of farming property must be a “farmer”, i.e., 80% or more of his assets (including the assets he will receive) must consist of farming assets. He must also be an active farmer or rent the land to such a farmer.

Cash can count as a farming asset (3.3% rate) if is is passed subject to a condition that it be invested in agricultural property (and remain as such for six years).