Inheritance and the peril of ‘forgetting’
Much attention has been paid to the prospect of a reduction in the inheritance tax burden in the October budget, with talk of the tax being “punitive” and a head of steam building up which the Coalition may find hard to resist. An increase in the tax-free thresholds, including the €335,000 one relating to children inheriting from parents, is probably on the cards.
But the Tax Strategy Group papers drawn up by public servants to advise on budget options raised another intriguing prospect. At the moment beneficiaries from a gift or inheritance do not have to make a declaration to the Revenue Commissioners unless it brings them to 80 per cent or more of the relevant threshold. So a child, for example, can receive gifts or inheritances of up to €268,000 from either or both parents without making any declaration.
Tax free thresholds are lifetime limits from the groups involved – any amount which a child receives from its parents dating back to 1991 is subject to the €335,000 threshold. The threshold for other close blood relatives – grandparents, aunts, uncles and siblings – is just €32,500. Tax at 33 per cent must be paid on anything over those limits.
What the Tax Strategy Group proposed was that all gifts above the €3,000 annual small gift exemption limit and all inheritances would have to be declared to the Revenue. This would mean, for example, that when a parent gifted a child money to help to buy a house – typically for an amount well below the threshold – the child would need to make out a capital acquisitions tax return to the Revenue.
The papers say that such a declaration would spare taxpayers the bother of keeping notes of all their gifts and inheritances and avoid data protection problems for their tax advisers. But could the real reason be that they believe taxpayers often” forget” to declare a previous gift from a parent or other relative when it comes time to inheriting a much bigger sum on their death?
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World of Work
Crisis simulations force executives to make better decisions under stress
One Friday afternoon in May, managers from some of the world’s biggest companies signed on to an unusual video call. Within minutes they were transported back in time to the Atlanta Olympics of July 1996. After a week without a hitch, the games had been thrown into chaos by a fatal pipe bomb attack. Should they continue?
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Inside Business podcast
As industrial peace breaks out at Aer Lingus, Barry O’Halloran and Davy equity analyst Stephen Furlong join Inside Business host Ciarán Hancock in studio to discuss this and other developments in the aviation sector this week.
Economics correspondent Eoin Burke-Kennedy also discusses tax strategy papers released by the Department of Finance on Tuesday, that help inform policy for October’s budget and which include proposals for a congestion charge for motorists and forcing people to report inheritances and gifts to Revenue.
Highlights this week
One to Watch
Next week is a big one on the reporting front for Irish listed businesses. The three big banks - Bank of Ireland, AIB and PTSB - all have interim results while numbers from Aer Lingus parent, IAG, will presumably have some detail on the financial cost of the recent pilots' dispute. Smurfit Kappa, meanwhile, will deliver its first set of results since the group relocated its main listing to New York following the Westrock merger.
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