Independent Trustee Company Blog

Showing posts with label Inheritance Tax. Show all posts
Showing posts with label Inheritance Tax. Show all posts

Monday, April 30, 2012

ITI Annual Conference Main Tax Points


As mentioned in our previous post, ITC recently sponsored the Irish Tax Institute Annual Conference. The Conference provides an opportunity to discuss issues that other advisors come across with their clients. 

One topic of conversation was the change in language in the latest update of the EU/IMF Programme of Financial Support for Ireland published in February. Previous versions have proposed the reduction of private pension tax reliefs as one of its revenue-raising measures, but the February update omits any reference to such a reduction. This coincides with previous comments, so it seems that marginal rate tax relief on pension contributions is safe, for now at least. That is very good news for those making personal pension contributions.

A couple of other themes that came up time and again with advisors, whether speaking from the podium or in private, were:

     1.    Inheritance Tax

Clients are realising that inheritance tax is now for everyone.  Well, “for everyone” was the phrase used by one practitioner and it is somewhat exaggerated, but inheritance tax affects far more people than it did four years ago. 

You can see the massive differences for someone with an estate of €3 million with three children.  The respective tax bills are:

2008 tax bill:                €287,000

2012 tax bill:                €675,000

Additional tax:             €388,000

That’s a hike in the tax take of over 130%!  It’s certainly enough to get people considering estate planning when a few years ago they would not have considered it was for them.

      2.    Capital Gains Tax

One of the more interesting aspects of the Budget last December, which has since been enshrined in the Finance Act, was the CGT exemption for property.  It seems that people are just not familiar with it as it was not highly publicised, but it provides excellent opportunities, including in the family context.

What the exemption means is that, for a property acquired between 7th December 2011 and 31st December 2013 and held for more than 7 years, on the sale of  that property no CGT will be payable on the gain attributable to that 7 year period.

A couple of interesting points: 

  • The exemption applies to any property within the EEA, i.e. the EU, Norway, Iceland and Liechtenstein.  A particular popular destination for property purchasers at the moment is Germany – the exemption would work there.
  • The exemption also applies where there is a gift element in relation to children.  If consideration is paid of 75% or more of the value of a property by a child to a parent, the gain over the 7 year period will be CGT free to the child.  Of course, stamp duty has to be factored in, but it is now at much more favourable rates.

Despite the recurring uncertainties in which we live these days, the certainty of tax does at least throw up some opportunities for advisors.

Director