There is a plus side of falling property values: the value drop reduces the Capital Acquisitions Tax (CAT) take, therefore, it may be opportune to consider passing on assets to the next generation now. There are potential reliefs available from CAT and passing on wealth to the next generation may also trigger Capital Gains Tax (CGT) and Stamp Duty (SD). What needs to be explored would be the potential impact of these taxes.

In broad terms CGT is charged at a rate of 25% on any gain made on the disposal of an asset by an individual. Where assets are transferred to connected individuals (mainly related individuals) for undervalue, or where they are gifted, Revenue will impose market value on the transaction for CGT purposes. To that end it is advisable to obtain a valuation of the asset where possible. An individual is not subject to CGT once they have died; they are only subject to CGT on gains on disposals made prior to their death. To that end CGT will not occur in an inheritance scenario.

Is the best advice then to wait to transfer assets? Not necessarily. There are a number of reliefs from CGT you can avail of which will mean that the assets can be transferred in a tax efficient manner to the next generation allowing them to prosper from the assets in the short term. One such relief is retirement relief; whereby an individual who has reached 55 years of age can pass on his business, farm or shares in a family company without triggering a CGT liability where the consideration is less than €750,000. In fact, where the transfer is to a child or a favourite relative there is no limit on the consideration for the purposes of qualifying for the relief.

A parent can also transfer a site valued at €500,000 or less to a child for the purposes of building a principal private residence without triggering a CGT or SD charge. Depending on the value of the site and whether the child received any other gifts or inheritance, the transaction may not result in a CAT charge for the child. Where an element of CGT must be paid on the transfer of an asset, the CGT paid by the disponer may be offset against the CAT liability of the recipient.

This is only available where the recipient retains the asset for two years. In the current climate this relief is extremely useful given the constraints on the availability of cash. Many individuals have realised losses on shares in the past eighteen months: it may also be possible to offset these losses against any CGT payable as a result of transferring assets.