Revenue Note for Guidance

29 Contingencies affecting gifts or inheritances

Summary

This section deals with a gift or inheritance given to a person which is to cease on the happening of a contingency. The contingency is ignored for the purpose of computing tax on that gift or inheritance. If the contingency happens, the tax will be adjusted as if the person took a limited interest for the actual period during which he/she enjoyed the property.

If, however, a substituted gift or inheritance is taken by a donee or successor on the happening of the contingency, that substituted gift or inheritance will be liable to tax.

Details

(1) Where a gift or inheritance is given to a person which is to cease on the happening of a contingency (other than the revocation of a gift subject to a power of revocation under section 39), the contingency is ignored for the purpose of calculating tax on that gift or inheritance. If, however, the contingency happens, tax is calculated on the basis that the donee or successor took an interest in the property for a period equal to the actual duration of his/her actual beneficial enjoyment of the property.

Example

Property valued at €100,000 is given to a woman aged 63 for life or until the marriage of her eldest son. She is taxed on a life interest in €100,000 for a female aged 63 in accordance with Schedule 1 as follows:

€100,000 x 0.6 = €60,000.

If her son marries after 10 years, the value of the benefit to the woman would be reduced to an interest in €100,000 for 10 years as follows:

€100,000 x 0.4913 = €49,130.

(2) If, on the marriage of her son, she was given a substituted benefit (e.g. a sum of money) this would be taxable as a new gift or inheritance.

Relevant Date: Finance Act 2015