As Ireland begins to count the cost of tackling the COVID-19 pandemic, it is clear that the cost of supporting citizens and business will have to be financed, and tax measures will play their part.

It has already been mooted (Irish times article of 5 May) that changes to wealth driven taxes are on the cards in next October’s budget, or possibly earlier if an emergency budget is required when the new government is formed.  In particular, tax rates applicable to Gift Tax, Inheritance Tax and Capital Gains Tax could be increased. In addition, existing tax reliefs such as retirement relief, entrepreneur relief etc could be curtailed or removed.

The pandemic has caused stock market turmoil and other asset classes have seen a material drop in value.

Accordingly, with the prospect of increased taxes in the future and lower asset values, now is the opportune time to consider making gifts in a tax-efficient manner.

Benefits to Donor

It is possible that assets which would have realised a gain (had they been transferred earlier in the year) leading to Capital Gains Tax ("CGT"), can now be passed at a lower tax cost.

Given the rate of CGT could be increased in the next Budget, higher tax costs are likely to arise, should the transfer of assets be delayed.

Crystallising losses on assets to shelter gains should also be considered. In the current climate, it is possible that a loss could be generated on the passing of assets.  However, it is important to remember that all assets are not created equal when it comes to their tax treatment, e.g. losses on disposal of offshore funds cannot be used to shelter CGT on other assets.

We recommend a CGT review should be undertaken, to ensure a tax efficient transfer of assets.

Benefits to Recipient

The recipient will acquire the asset at a lower value and lower associated tax cost due to taking advantage of lower existing inheritance tax rates and whatever tax reliefs are currently available.  They will also benefit from the income and future growth of the assets which they receive.

Where concern exists that the recipient may be too young or inexperienced to receive the asset now, or where asset protection is on your mind, we can advise on a structure which would allow you retain some control over the management of the assets, while enabling the recipient to secure future benefits from asset ownership.  We typically recommend the use of an appropriate Trust or Family Partnership structure to assist clients in this situation.

Please contact our experts in this area (see details below) over the coming months to develop and implement a plan before the coming Budget in October.