Capital acquisitions tax is levied on the recipient of gifts and inheritances. Transfers between spouses, however, are exempted from CAT. The tax is charged on the value of the gift or inheritance in excess of the relevant exempt threshold. There are three exempt thresholds as follows: Class I: £192,900 – where the recipient is a child, or minor child of a deceased child, i.e. certain grandchildren. This threshold also applies to a parent where he or she takes an absolute inheritance on the death of a child; Class ll: £25,720 – where the recipient is a brother, sister, nephew, niece, lineal ancestor or lineal descendent, other than those covered by Class I; Class III: £12,860 – where the recipient does not fall within Classes I or II i.e. non-lineal relations and strangers.
Since 1990, these thresholds have been indexed to the CPI on a yearly basis.
Where a beneficiary has received previous gifts or inheritances since 2 December 1988, the value of these benefits must be taken into account for the purposes of determining the current liability to tax.