Capital Acquisitions Tax Consolidation Act 2003 section 37

Cesser of liabilities

Section 37 deals with the tax consequences that arise when a liability to which a gift or inheritance was originally subject comes to an end (cesser of liability), treating that cesser as a separate taxable event.

• When property is taken subject to a liability (such as an annuity or right of residence) that reduces its taxable value, the ending of that liability is itself treated as a new gift or inheritance for CAT purposes.
• Where the liability was charged on or secured by property, the deemed gift or inheritance consists of the whole or the appropriate part of that property, valued at the date the liability ceases — not at the date it originally commenced.
• Where the liability was not charged on or secured by any property, the deemed gift or inheritance consists of a notional capital sum calculated to produce annual income equal to the annual value of the liability, using the yield on long-dated Government securities (per section 5(2)(b)).
• The notional capital sum (where the liability was unsecured) is deemed not to be situated in the State, which means it falls outside the charge to tax where the territorial conditions for taxability under sections 6 and 11 are not met — for example, where the disponer was not domiciled in the State (for dispositions before 1 December 1999) or where neither the disponer nor the beneficiary was resident or ordinarily resident in the State (for dispositions on or after 1 December 1999).