Inheritance tax

Q&A: QWhat is the current amount that a deceased person has left above which his estate is liable for inheritance tax? I know that assets passed on (ie gifted) during one's life up to a certain date before the demise become no longer liable. How many years back is this the case - 10, 15? The main beneficiary in this case is my daughter. Mr N.M., Louth

AInheritance tax works in different ways in different countries. The scenario you outline, where the estate become liable to inheritance tax, is the process that applies in the UK. Inheritance tax there is, in general, levied on any individual's estate in excess of £300,000 rather than on the beneficiary.

Under measures announced last year by British chancellor Alistair Darling, spouses can transfer unused inheritance tax relief - effectively allowing a couple to double the threshold. The inheritance tax rate is 40 per cent.

Again, under the UK arrangements, gifts made more than seven years before demise fall out of consideration when assessing the size of someone's estate; gifts made less than seven years before a death are taken into account.

The situation in the Republic is different - most notably in that inheritance tax/gift tax (more formally known here as capital acquisitions tax - CAT) is assessed on the beneficiary.

There are a series of thresholds below which no CAT applies. The relationship between the person giving the gift/inheritance and the recipient will determine which threshold applies. In your case, you note that your daughter will be the main beneficiary of your estate.

Gifts or inheritances from a parent to a child attract the highest threshold, Group A - in 2008 this figure is € 521,208.

Inheritances or gifts between other "linear relatives" - siblings, grandparents to grandchildren or uncles/aunts to nieces/nephews - are assessed under Group B. This threshold is 10 per cent of the Group A threshold and, this year, stands at € 52,121.

Gifts from anyone else come under Group C, where the threshold is half the Group B figure - € 26,060 in 2008.

Since 2001, these figures are index linked so that they rise automatically each year in line with the consumer price index.

It is worth noting that the first € 3,000 of any gift or bequest from any individual to any beneficiary - regardless of their relationship - in any given year is exempt from CAT.

A couple of other points to note. If you are bequeathing foreign property to someone who is not tax resident in the Republic, Irish inheritance tax does not apply; however, if you are bequeathing Irish property to someone, even if they do live abroad, they will be liable to CAT.

PRSI recourse

QI notice that my State pension (contributory) is taxable income while my annual PRSI contributions paid over my lifetime were not tax allowable. Furthermore, my annual PRSI contributions were quite substantial and would, I estimate, in normal (AVC) terms have provided me with an income greater than what I now receive. Is there any recourse?

Mr M.D., Limerick

A I see that you are viewing Pay Related Social Insurance (PRSI) as simply a means of funding a (State) pension and drawing a corollary with tax relief due on private pension contributions by means of, for example, additional voluntary contributions (AVCs). However, PRSI is not simply a State pension scheme. There are two main elements within PRSI:

Social insurance - this goes to the Social Insurance Fund where it pays not only pensions but also social welfare benefits;

The health contribution - this goes to the Department of Health and Children to help fund health services.

So, apart from a State pension, your PRSI would fund payments if you were unable to work because of injury or disability as well as jobseeker's benefit (previously called unemployment benefit) if you are otherwise out of work for a period of time. Not that it is directly applicable to you, but it also funds maternity benefit. Dental and optical treatments are also covered by PRSI contributions.

As to whether you have any recourse to refunds or tax relief on these payments - current or historic - the answer is no.

* * *

LAST WEEK, Mr J.K. asked whether there was an internet site that might show historical dollar/euro exchange rates so that he could calculate the capital gain/loss on his dealings in the US market. A number of readers have since emailed me site suggestions.

These include: www.oanda.com/convert/fxhistory, www.fxstreet.com and www.ecb.int/stats/exchange/eurofxref/html/index.en.html.

Of these, www.oanda.com appears the most straightforward. Thanks to everyone for their feedback.