Capital Acquisitions Tax
Guide to the CAT Treatment of Receipts by Children from their
Parents for their Support, Maintenance or Education.
[Section 82 Capital Acquisitions Tax Consolidation Act 2003
as amended by Section 81, Finance Act 2014]
1. Background
1.1 Lifetime Parent to Child Tax Free Threshold.
Capital Acquisitions Tax (CAT) is a tax that imposes a charge on individuals who receive
gifts and inheritances where the value of the gifts and inheritances exceed that individual’s
lifetime tax-free threshold. As and from 9th October 2019, a child is entitled to a life time tax-
free threshold of €335,000 in respect of gifts and inheritances taken from his or her parents.
Where the aggregate of the gifts and inheritances received by a child from a parent exceeds
€335,000, only the excess is charged to tax.
1.2 Small Gift Exemption.
In addition to this €335,000 tax-free threshold, the rst €3,000 of gifts to a child in any year is
exempt from CAT under the annual small gifts exemption. This means that each parent can
give a gift to a value of €3,000 to a child (or to anyone else) each calendar year without any
CAT charge arising. Two parents can make gifts to a child to the value of €6,000 in any year
free of CAT. Indeed, two parents could, if they wished, gift €12,000 in total each year to each
son or daughter and their respective partner (e.g. ancée, ancé, daughter-in-law, son-in-law)
free of CAT.
There is no obligation on a beneciary of a gift to spend it in the year it is received. Gifts can
be accumulated by the child after receipt to meet future expenditure e.g. to meet a deposit on
a house.
Gifts which qualify for the small gifts exemption do not reduce the parent to child tax–free
threshold of €335,000 – gifts in excess of the small gifts exemption reduce the threshold after
taking the exemption into account.
Gift Small Gift
Exemption
Tax Free
Threshold
[335,000]
CAT Charge
Year 1 Parent
pays for holiday
for child at a
cost of €5,000
€5,000 (less 3,000
exempt)
Tax Free
Threshold
reduced by
€2,000 to
€333,000
NIL – in Year 1
Year 2 Parent
gives child a
gift of €20,000
to buy a car
€20,000 (less 3,000
exempt)
Tax Free
Threshold
reduced by
€17,000 to
€316,000
NIL – in Year 2
Year 3 Parent
gives child a
gift of €100,000
as a deposit on
a house
€100,000 (less 3,000
exempt)
Tax Free
Threshold
reduced by
€97,000 to
€219,000
NIL – in Year 3
Year 4 Parent
gives child
a gift of of
€30,000 to
replace a car
€30,000 (less 3,000
exempt)
Tax Free
Threshold
reduced by
€27,000 to
€192,000
NIL – in Year 4
Year 5 Parent
makes a gift of
an apartment
valued at
€200,000 to
child
€200,000 (less 3,000
exempt)
Tax Free
Threshold
reduced to NIL
€1,650*
in Year 5
(i.e. €5,000
@33%)
Example 1 – Lifetime Parent to Child Tax Free Threshold
*CAT Charge on the Total Gifts of €355,000 in the example above is calculated as
follows:
Total Gifts
Less Small Gift Exemption €3000 x 5 years
Total Taxable Gifts
Less Tax Free Threshold
CAT Chargeable on
CAT Charge €20,000 @33% =
€355,000
€ 15,000
€340,000
€335,000
€5,000
€1,650
Example 2. Small Gifts Exemption
Both parents gift €3,000 to their child each year for 10 years, which the child saves. This
amounts to €60,000 after 10 years. This amount can be used as the child wishes and is not
subject to CAT – as the annual €3,000 small gifts exemption from each parent for each of the 10
years is not exceeded.
In addition, the €335,000 lifetime tax-free threshold is preserved intact for use against larger gifts
or inheritances.
2. Exemption in respect of payments for support, maintenance and education (position prior
to Finance Act 2014)
2.1 Section 82(2) CATCA exempts from CAT money or money’s worth given by an individual (“the
disponer”) during his or her lifetime for the support, maintenance or education of his or her
children, his or her civil partner’s children or a person in relation to whom he or she stands in
loco parentis, as well as payments for the support or maintenance of a dependent relative
under section 466, TCA 1997.
2.2 To qualify for the exemption, the provision of the support, maintenance or education must be –
(i) Such as would be part of the normal expenditure of a person in the circumstances of the
disponer, and
(ii) Reasonable, having regard to the nancial circumstances of the disponer.
2.3 Revenue’s view is that “normal” in this context refers to the nature of the expenditure rather than
the amount and that it means expenditure that might typically be incurred by a person in the
circumstances of the disponer.
For example, payment of fees and accommodation costs for a dependent child attending college
would be normal and would be exempt from gift tax – albeit not all parents would incur such
costs. On the other hand, the purchase of a house for a child would not be considered part of the
“normal” expenditure of a disponer, regardless of the nancial means of the disponer and would
not be exempt from gift tax.
2.4 “Reasonable” has to be judged by reference to the nancial circumstances of the disponer. This
requirement prevents a disponer from, for example, making payments that are disproportionate
when viewed in the light of the disponer’s means. However, it does not, of itself, set a general
ceiling on the value of what can be provided by way of maintenance or support.
2.5 Revenue’s long held interpretation of the exemption provided by Section 82(2) CATCA 2003 is
that it does not cover all payments by a parent to a child notwithstanding that such payments
may meet the tests of “normal” and “reasonable” outlined in the foregoing paragraphs. The
exemption only applies to the provision of support, maintenance or education. This implies
at least some level of nancial dependence on the part of the child. Revenue does not accept
that gifts to a child who is nancially independent can come within the terms of the exemption.
Neither does it accept that gifts of a capital nature to a child are exempt from gift tax under this
section.
3. Finance Act 2014 changes to Section 82 CATCA 2003.
3.1 Section 81 Finance Act 2014 amends Section 82(2) CATCA 2003 to conne the exemption to the
provision, in the lifetime of the disponer, of support, maintenance or education to
• a minor child of the disponer or of the civil partner of the disponer or,
• a child of the disponer, or of the civil partner of the disponer, who is more than 18 years of
age but not more than 25 years of age who is receiving full-time education or instruction at
any university, college, school or other educational establishment, or
• a child of the disponer or of the civil partner of the disponer who, regardless of age, is
permanently incapacitated by reason of physical or mental inrmity from maintaining
himself or herself.
3.2 Section 81 Finance Act 2014 also amends the exemption in Section 82(4) CATCA 2003 which
previously applied to ‘normal’ and ‘reasonable’ payments for support, maintenance, or education
to orphaned minor children. This exemption is now available to children not more than 25
years of age who are in full-time education and to children of any age who are permanently
incapacitated by reason of physical or mental inrmity from maintaining themselves.
3.3 For the purposes of the amended Section 82(2) CATCA 2003, receiving full-time education or
instruction includes undergoing training for any trade or profession in such circumstances that
the child is required to devote the whole of his or her time to such training for a period of not less
than 2 years.
4. Gifts within the scope of gift tax
4.1 Gifts within the scope of gift tax include gifts of money, assets with a resale value and the use of
assets free of charge or for a charge that is less than what could be obtained by the disponer on
the open market.
4.2 Examples of Non-Exempt Gifts/Payments/Benets
House Purchase
The purchase of a house by a parent for a child would not be considered part of the “normal”
expenditure of a disponer, regardless of the nancial means of the disponer and would not be
exempt under Section 82 CATCA 2003 or any other provision.
Free Use of House
Parent buys a house for €1 million and allows his 30 year old daughter to have the free use
of the house indenitely. The annual rental value of the house is €36,000. The free use of the
house is a gift equal to the annual rental value each year (less the annual small gift exemption of
€3,000). If two or more of the parent’s children have the free use of the house, the value of the
gift is shared.
If the child ultimately inherited the house, that inheritance could be eligible for exemption from
CAT under the principal private residence exemption in Section 86 CATCA 2003 once the
conditions governing the relief were satised.
Gift of House Deposit
A Gift to a child of a deposit for a house in excess of the annual small gifts exemption of €3,000
is subject to CAT.
Gifts of Money
Gifts of money in excess of the annual small gifts exemption of €3,000 are subject to CAT.
5 Examples of Gifts / Payments / Benets that are Exempt
The following are examples of gifts / payments / benets that are exempt from CAT:
Occupation of Family Home by Child
The non-exclusive occupation of the family home by a child (including where relevant the
child’s spouse/partner) family member. Revenue’s view is that this does not give rise to a gift
by the owner of the property to the family member. Thus, in line with Revenue’s long standing
approach, there is no question of trying to attribute a value to “bed and board” provided by the
owner of the house to a child (including where relevant that child’s spouse/partner) of any age.
Free Use of House by Child attending University
The provision of the use of a house owned by a parent rent-free, to a child not more that
25 years of age who is attending university, to help support and maintain the child while in
university, is a normal and reasonable provision and is, accordingly, exempt from tax under
Section 82 CATCA 2003.
Cost of Family Functions Paid for by Parent
The costs of a family function such as a wedding paid for by a parent. Revenue takes the view
that this is the expense of the parent rather than a gift to the child. Therefore, there are no gift
tax implications. This extends not just to the cost of catering for guests but also to all of the costs
associated with the occasion.
However, a gift such as a car, a house or a paid holiday is still a gift for gift tax purposes,
notwithstanding the fact that it may be associated with a family occasion such as a wedding. To
the extent that any such gifts do not exceed the €3,000 small gift exemption in any year, they are
not subject to CAT.
Payments to Cover Child’s Normal Costs Associated with Attending College
The following payments are not subject to CAT under Section 82 CATCA 2003:
1. Provision of a weekly/monthly sum of money to a child, not more than 25 years of
age, attending college in order to cover costs such as rent, food, clothing, purchase of
educational material and pocket money,
2. Payment of such a child’s tuition fees, and
3. Payment of such a child’s transport costs to university or college.
The information in this document is provided as a guide only and is not professional advice,
including legal advice. It should not be assumed that the guidance is comprehensive or that it
provides a denitive answer in every case.
April 2020
RPC014016_EN_WB_L_1
Designed by the Revenue Printing Centre
