Gift and inheritance tax in Ireland is based on a system of taxing what the beneficiary obtains. This is the opposite to the UK where the estate is taxed rather than the beneficiary. As a result of the way the Irish system is designed, we have a system of aggregation. This means to work out the tax for a beneficiary you look at not only what they received now, but you add to this, what was received in the past. How far you go back is set in statute, in that you go back to the 5th of December 1991. You will be aware that this is called aggregation. So gifts or inheritances are said to aggregate, that is add up.

A beneficiary pays tax if what they received now added to what they received in the “past” exceeds a particular threshold. The amount of the tax free threshold depends on the relationship between the beneficiary and the person giving the gift or the person who has died in the case of inheritances (known as the donor). In Ireland we have three thresholds, which as of 10 January 2023 are

Class A – Parent/child – €335,000

Class B – Brother/sister, aunt/uncle, nephew/niece, grandparent/grandchild – €32,500

Class C -Other relationships – €16250

When a person dies, the Form SA.2 is completed providing the Revenue Commissioners information about the deceased’s assets. In that form we also inform Revenue of what the beneficiary is due to receive under the estate of the deceased. In the old CA24 system, the beneficiary informed Revenue of all gifts that were received in the past, regardless if they were Class A, B or C. This also applied to the new SA.2 system.

However, there has been a recent change to the SA.2. Under the new system, you only need to include the prior benefits that directly relate to the threshold of the beneficiary. So if you are acting for a child, then you only need to include prior class A benefits. The system will continue to show boxes to include information for other prior gifts in other classes. However, if you notice there will be no red astrix beside these boxes (indicating a mandatory field). Only those that relate to the class of the beneficiary in question.

Even though this new system is in place, it doesn’t mean that one should let up on prior gift procedures in your estate practice. Requesting prior gift information from beneficiaries should be hard-wired into your estate procedures at an early stage. It is our practice to request this information at the time of introducing oneself to beneficiaries and informing beneficiaries about their benefit. We attach here a sample prior gift form to be used, which may act as a useful precedent.

It is important to get this information at the start, but as Murphy’s law will have it, in fact you really only need this information at the end, when you are conducting the tax returns for the beneficiary. To prepare the inheritance tax returns, one will need to know the prior gift situation of any beneficiary. This may be conducted by you as solicitor to the estate or some other legal or accounting professional. It adds greatly to the smoothness of the final steps in having the prior gift information to hand. It can be cumbersome and a little embarrassing to have to go back to beneficiaries at the end of the process looking for this information when it should have been on the file from the start.

Hope this helps and I attach here the form of prior gift form we use.

Remember, if you have any probate, capacity, tax or will drafting queries, please don’t hesitate to reach out to me on the query service on this site. Colm Kelly