Dec 2010 | Budget 2011 - Capital Taxes Aspects

Budget 2011 introduced on 7 December 2011 made significant changes to the rates of Stamp Duty for residential properties and reduced the tax free thresholds for CAT (gift/inheritance tax) but it made no changes to Capital Gains Tax (CGT).  For further details of the other tax aspects of the Budget, see here.

There are further changes expected to the CAT and CGT regimes, as previously announced in the National Recovery Plan. Some of these may not be introduced until 2012, though some may be introduced in at the time of the publication of the Finance Bill 2011 or on the enactment of the Finance Act 2011, expected in early Spring 2011.

CAT changes in Budget 2011

The tax free thresholds have been reduced by 20% with respect to gifts or inheritances taken on or after 8th December 2010.  Any inheritances taken before that date but where the valuation date for the benefit arises after 8 December 2010 will be governed under the pre Budget thresholds.  The changes are as follows:-

Group A (e.g. child, minor child of a predeceased child, inheritance of an absolute benefit by a parent) - €332,084

Group B (e.g. sibling, aunt/uncle, niece/nephew, other grandchild, lineal ancestor or descendant) - €33,208

Group C (e.g. stranger, in-law, cousin or other more distant relative) - €16,604.

CAT at 25% will arise on the balance of a benefit taken over these thresholds after accounting for any other benefits taken from the same threshold since 5 December 2001. For further details on CAT generally, see here.

Stamp Duty Changes

The rates for residential property sales or transfers have been reduced. Revenue guidance on the changes can be found here. For instruments executed on or after 8 December 2010, a rate of 1% will apply in respect of property valued up to €1,000,000 and a rate of 2% will apply to the excess of the value over €1,000,000.

The tiered rates up to a maximum of 6% for the sale or transfer of other property such as commercial property remain.

Various reliefs and exemptions with effect from 8 December 2010 are no longer available for residential property:-

    - consanguinity relief, which had reduced the relevant rate by half for transfers to relatives

    - parent to child site relief for building a house

    - owner occupier new houses

    - first time buyer relief for owner occupiers   

Transitional arrangements apply in respect of binding contracts signed prior to 8 December 2010 where the transfer is executed before 1 July 2011

CGT changes

To date there have been no changes to the CGT rates or reliefs or exemptions.

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Aileen Keogan | Solicitor & Tax Consultant | 21 The Avenue | Louisa Valley | Leixlip | Co. Kildare | Ireland

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