An upside to the downside - A silver lining to those clouds of recession

It might be difficult to consider looking at the current recession and more particularly the dramatic fall in property prices as having any kind of silver lining, but in fact there is one. The result of the dramatic fall in property and assets values is that in some cases, it may now be possible to pass on property or assets to one's children or grandchildren without incurring tax liabilities which might have been incurred during the boom years of the Celtic Tiger when asset values were much higher.

Passing on property either by gift inter vivos, that is to say between living people, or following a death invariably gives rise to the possibility of capital acquisitions tax (CAT), capital gains tax, (CGT), or stamp duty (SD). CAT is potentially payable by someone who receives a gift or inheritance, CGT is payable by somebody who disposes of property and makes a capital gain in the process and SD is payable on certain transactions.

CAT is charged to the person receiving the benefit and is calculated on the value of the benefit less any liabilities or costs paid by the beneficiary, at a rate of 25%. Transferring any lower asset value now, while the values are still low, could result in a reduced tax liability or no tax liability at all. The younger generation may benefit from having the assets now rather than later when there may be a cost in acquiring it or the cost of acquiring it may be higher. Depending on what the asset is there may be an exemption or relief from CAT, depending on the relationship to the person from whom the gift or benefit is received. Children of a donor have a tax-free threshold of €414,799. Also a parent can transfer a site at a market value of less than €500,000 to enable a child to build a principal private residence, without any CAT arising.

Agricultural relief, which obviously only applies to agricultural land and Holdings, can reduce a CAT charge by up to 90%, and similar reliefs are available in relation to the transfer of a business. Also, a dwellinghouse in which both parties have resided for a period of time can be totally exempt from CAAT, provided certain conditions are satisfied.

Fortune favours the brave. For those who are asset rich and who intend to benefit the next generation "in due course", perhaps they should think about current opportunity and remember the words of Chuck Feeney who said that a man can only wear one pair of shoes at a time. Pass on your footwear!