Capital Acquisitions Tax Consolidation Act 2003 section 73

Relief in respect of certain policies of insurance relating to tax payable on gifts

Section 73 exempts from capital acquisitions tax the proceeds of certain approved insurance policies that are taken out specifically to fund the payment of gift tax or inheritance tax arising on lifetime gifts made by the insured.

• The proceeds of a relevant insurance policy are exempt from gift tax and inheritance tax, but only to the extent that those proceeds are actually used to pay the tax arising on a lifetime gift made by the insured within one year of the appointed date.
• To qualify, the policy must be in a Revenue-approved form, funded by annual premiums, have a minimum term of eight years (unless the insured dies or becomes critically ill sooner), and be expressly taken out under this section to pay the relevant tax.
• If the insured uses any part of the policy proceeds for a purpose other than paying the relevant tax, those proceeds lose their exemption and become taxable (unless given to a spouse or civil partner under section 70, or to a charity under section 76).
• A section 72 qualifying insurance policy (taken out to pay inheritance tax on death) can also qualify as a relevant insurance policy under this section if its proceeds are used to pay gift tax on a lifetime disposition made within one year of the appointed date, and vice versa.