Planning for financial gifts

A lot of your clients will be planning to make financial gifts to their children in the future. Naturally, they’ll be concerned about any tax liability that might involve. 

A savings policy that qualifies for Section 73 relief allows your client to pay the tax as well as give the money, as long as specific Revenue requirements are met.

Explaining Capital Acquisitions Tax to your client

Clients won’t necessarily know what Capital Acquisitions Tax (CAT) is or how it works. We’ve pulled the following information together to help you explain it to them. 

Anyone who receives monetary gifts or inheritances worth more than a certain amount may have to pay CAT, which has been set at 33% since December 2012. That amount, called a threshold, varies depending on the relationship between the giver and the receiver. 

There are three groups covering different relationships, each of which has a different CAT threshold. It’s important to note that the threshold applies to the total amount of gifts and inheritances received since 6 December 1991. 

The groups and thresholds are:

Group Beneficiary Tax-free amount

A

 Child (including adopted child, step-child and certain foster children) or minor child of a deceased child of the person making the gift €335,000
B Brother, sister, niece, nephew, grandchild of lineal ancestor or descendant €32,500
C All other relationships, other than those mentioned in A or B

€16,250

CAT thresholds from 9 October 2019
CAT is currently 33%

The Small Gifts Exemption

For tax calculation purposes, a small gift is classified as any amount up to €3,000. Your client can make a small gift to as many people as they like in any calendar year, without impacting on their CAT threshold. That makes it a useful tool for clients who want a tax-efficient way to share their wealth with their family. 

Contact your business manager to find out more.

Savings policy requirements

Savings policies set up to pay CAT have to meet certain Revenue requirements. They are:

  • The policy must be set up under Section 73 of Capital Acquisition Tax Consolidation Act 2003 for the express purpose of paying CAT.
  • Monthly, quarterly, half yearly or yearly premiums must be paid into the policy continually for at least eight years.
  • Only married couples or civil partners can have a joint policy – for everyone else it must be in one name only.
  • Policy owner(s) must pay the premiums.
  • The maximum difference between the highest and lowest annual premium over the period of the policy can’t be more than 100%.
  • If premiums stop at any point before the end of eight continuous years, and aren’t started again for a year, tax relief can't be applied.
  • If premium payments aren’t made for one year after the end of eight continuous years, no further premiums are allowed.
  • The policy owner has 1 year from the date they withdraw the money from the policy to pay the gift tax due. After this date the relief will not apply.

If all of the above requirements are met, money withdrawn from the policy can be used to pay the tax on your client’s gift without increasing overall liability. In other words, the payment is relieved from CAT.

Finding out more

  • Get the client guide

    Our downloadable client guide will help clients understand their options.

  • Apply for Synergy Regular Invest

    Your clients can also use this form to apply for Synergy Regular Invest, which they can use as their savings policy.

Useful links

  • Find out about Synergy Regular Invest

    The long-term policy that can be used to save against Capital Acquisitions Tax.
     

  • Speak to a technical adviser

    If you have a technical question about our products or services, get in touch with our technical solutions team.

The information on standardlife.ie/adviser is designed for financial advisers. It's not suitable for anyone else. If you're not a financial adviser, please go to standardlife.ie for information about the products and services we offer.