The Tax Appeals Commissioners have rejected Revenue’s practice in relation to the exemption from CAT of benefits taken for the purpose of discharging medical expenses.
Section 84 of the Capital Acquisitions Tax Consolidation Act 2003 provides that where a beneficiary takes a benefit exclusively for the purpose of discharging qualifying medical expenses of a permanently incapacitated individual, then the benefit passing is exempt from CAT.
The Revenue CAT Manual states that “it is the intention of the disponer providing the gift or inheritance that determines the availability of the exemption. In the absence of such an intention, it is not relevant that a beneficiary might decide, after receiving a gift or inheritance, to use it to discharge medical expenses.”
32TACD2019 extract as follows
“For the reasons outlined above, I find that:-
(a) the Appellant’s children are individuals who are permanently incapacitated by reason of physical infirmity;
(b) it is the intention of the recipient of a gift or inheritance in receiving that gift or inheritance, and not the intention of the disponer in making the gift or inheritance, that is relevant to determining eligibility for relief from Capital Acquisitions Tax pursuant to section 84 of the Capital Acquisitions Tax Consolidation Act 2003;
(c) it has always been the Appellant’s intention to use the inheritance received from the Deceased to discharge expenses relating to medical care, including the cost of maintenance in connection with such medical care, for his children;
(d) the inheritance received by the Appellant from the Deceased has been or will be applied exclusively for the purpose of discharging expenses relating to medical care, including the cost of maintenance in connection with such medical care, for his children; and,
(e) the Appellant is therefore entitled to relief from Capital Acquisitions Tax pursuant to section 84."
However note the Revenue issued an update to their manual to reflect their view that they do not agree with the determination of the Appeal Commissioner although the Revenue did not appeal the determination.
