Revenue Note for Guidance

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Revenue Note for Guidance

82 Exemption of certain receipts

Summary

This section grants exemption from capital acquisitions tax for compensation and damages, winnings from betting, lotteries, etc., certain payments in bankruptcy matters, certain normal and reasonable payments within the family, certain payments to incapacitated individuals and normal and reasonable payments from trusts towards the support, maintenance or education of minor orphaned children of the disponer.

Details

Compensation or damages for the following are exempt from tax:

  • (1)(a) any tort such as personal injuries, damage to property, libel, etc.,
  • (1)(b) damages received by a person arising out of the death of another person.

It is not required that compensation or damages be awarded by a court. It is sufficient that the benefit be received by way of bona fide compensation or damages, whether awarded by a court or agreed by compromise.

(1)(c), (ca) Bona fide winnings from wagers, lotteries, etc. are exempt from tax as are payments from the competition “Your Country, Your Call” launched by the President on 17 February 2010.

(1)(d) Any benefit arising out of—

  • the payment to the Official Assignee in Bankruptcy of money which has been provided by, or which represents property provided by, friends of a bankrupt, or
  • a remission or abatement of debts by the creditors of a bankrupt to fulfil an offer of composition after bankruptcy in accordance with section 39 of the Bankruptcy Act 1988,

is also exempt from gift or inheritance tax.

(1)(e) Gift or inheritance tax will not be payable on:

  • sums provided by friends, or
  • sums foregone by creditors,

of an arranging debtor, to enable him/her to fulfil a proposal being made by him/her under section 87 of the Bankruptcy Act 1988 for the future payment or compromise of his/her debts where such proposal is—

  • accepted by his/her creditors, and
  • approved by the Courts.

This deals with a situation similar to that dealt with in subsection (1)(d).

(2) Any payments made for the benefit of a dependent which could reasonably be described as normal maintenance and education expenses are exempt from tax. The payments which come within the scope of the exemption are payments which are part of the normal expenditure of the disponer and are reasonable having regard to that disponer’s financial circumstances generally. Post FA 2014 the recipients covered are—

  • a minor child of the disponer or of the civil partner of the disponer, or
    a child of the disponer, or of the civil partner of the disponer, who is more than 18 years of age but not more than 25 years of age and is receiving full-time education or instruction at any university, college, school or other educational establishment, or who, regardless of age, is permanently incapacitated by reason of physical or mental infirmity from maintaining himself or herself.
  • a person to whom the disponer is in loco parentis;
  • a dependent relative under section 466 of the Taxes Consolidation Act 1997 (this covers a relative of the disponer, or of his/her spouse/civil partner, who is incapacitated by old age or infirmity, or the widowed mother or widowed father/surviving civil partner of the disponer, or of his/her spouse/civil partner whether incapacitated or not, whose total income does not exceed a specified amount and who is maintained at his/her own expense by the disponer).

(3) The receipt by a permanently incapacitated individual of funds which are held on a qualifying trust, or of income deriving from funds held on such a trust, is not subject to capital acquisitions tax.

A qualifying trust is a trust which has been established by deed:

  • exclusively for the benefit of one or more named incapacitated individuals;
  • where the trustees hold the trust funds for the benefit of the named incapacitated individual or individuals;
  • where, in the event of the death of the named incapacitated individual or individuals, the undistributed part of the trust funds are to be applied for charitable purposes.

(4) The receipt by a minor child/child of a civil partner or also, post FA 2014, by a child/child of a civil partner up to the age of 25 if in full-time education or by a child who, regardless of age, is permanently incapacitated by reason of physical or mental infirmity of money or money’s worth for support, maintenance or education from a deceased parent/civil partner, where the other parent/civil partner is also deceased, will not be regarded as a gift or inheritance on condition that:

  • the provision of support, maintenance or education is such as would be part of the normal expenditure of a person in the circumstances of the parent/civil partner prior to his/her death, and
  • is reasonable having regard to the financial circumstances of the parent/civil partner prior to his/her death.

Relevant Date: Finance Act 2015