I have been the recipient of the €3,000 gift from my both of my grandparents for several years now. Two years ago, I also received a sum of €32,000 from them, just under the threshold for group B of Capital Acquisitions Tax. I have not received any other inheritances/gifts from anyone else.
I have never filed a tax return for this gift (assuming that I did not need to as no tax was owed on them) although I am now aware that I should have been doing this as it was above 80 per cent of the relevant threshold.
My question is whether there is any possibility of a penalty being imposed for this failure to file a return (notwithstanding that they would not have incurred any tax) and whether I am obligated to raise the issue with Revenue now.
Ms S G, email
The 80 per cent threshold is something that catches a lot of people out – especially those who are not used to filing tax returns. And it is something of an outlier in personal taxation as it is an obligation but no actual tax is due.
The rule under capital acquisitions tax (CAT) – more generally known as inheritance tax or gift tax – is that you must notify Revenue when you come within 20 per cent of the relevant threshold.
This is, of course, complicated by the the fact that there are a number of different thresholds to consider and that the thresholds on each of them can change annually at the whim of the Minister for Finance in the budget.
Your liability to CAT depends on whether the money is coming to you from a parent, a linear relative (such as a grandparent, aunt, uncle or sibling) or someone else (called a stranger even though they could be an in-law or a cousin).
In the first case, category A, the threshold above which you must pay tax is current €335,000. That means the 80 per cent line is crossed when you have received anything more than €268,000.
And it is important to remember that this is cumulative. You could for instance, receive an earlier gift of €20,000 from your parents and then an inheritance of €200,000 when one parent dies. If you subsequently receive a gift of €50,000, this brings your cumulative benefit from your parents to €270,000: that’s above the threshold and you need to let Revenue know.
For grandparents and other liner relations, Category B, the threshold is currently €32,500 and the 80 per cent line is therefore drawn at €26,000.
For others, Category C, the 80 per cent line is half that, €13,000, and the threshold for paying tax €16,250. All are cumulative
If the 80 per cent line is breached by way of an inheritance, Revenue will generally notify you because, obviously, they have the information to hand as part of the process of settling an estate.
If it is a gift however, they have no necessary way of knowing, which is why the onus is on you to tell them by way of filing an IT38 form. This is an annual filing - due by October 31st – covering all gifts and inheritances that must be notified over the course of the past year.
If you are not a regular filer, an additional hassle is that you will need to file your form electronically through Revenue's MyAccount portal as the tax authorities are moving an increasing portion of tax returns. That will mean setting up an account and getting a password from Revenue. It is fairly straightforward but can take a bit of time.
Having missed the deadline, are you still obliged to file a form? Yes, absolutely. The obligation does not disappear simply because you inadvertently missed the deadline.
Generally, if you fail to file a tax form, you are charged interest on the tax due. Clearly, here, there is no tax due. You are not in default and Revenue are likely to do no more than send you a note reminding you of your filing obligations for future reference.
