Gintax answers Sunday Independent readers’ questions on tax.
Article published on 23 January 2022
Will I trigger a tax bill for my friend or myself if I cover her medical bills?
Q My friend needs urgent medical treatment but does not have the funds to pay for it and neither does she have health insurance. I’m planning to cover the costs of her medical treatment so she can get seen to quickly. The bill will likely run to more than €20,000. Will any tax bill be triggered for either my friend or myself if I cover her medical costs? If so, is there any way to limit any ensuing tax bills?
Tommy, Co Meath
A Generally the provision of a benefit, such as a gift or discharge of personal expenses is within the scope of Irish Capital Acquisitions Tax (CAT) for the recipient.
In most cases, such benefits come well within the €3,000 annual small gift exemption (where any individual can give tax-free gifts of up to €3,000 a year to another). Irish CAT law contains various other reliefs including an exemption for a gift taken exclusively for the medical care of a permanently incapacitated individual. It is unclear whether your friend would be so regarded – and this will depend on the nature of her physical or mental condition.
Even if this medical exemption was unavailable, the first €16,250 of the costs covered by you should fall within her lifetime CAT tax-free threshold for non-relatives – assuming that she has received no prior benefits from you or other non-relatives. Under CAT rules, an individual can inherit up to €16,250 tax-free from non-relatives over his or her lifetime.
Where the costs are spread over two calendar years, she should also be entitled to the annual exemption for each year. In such circumstances, an amount of up to €22,250 should be exempt from CAT and no tax liability should arise for her.
Furthermore, assuming you have sufficient Irish taxable income such as salary, you may be entitled to Irish tax relief on the expenses, with the relief capped at 20pc of the cost.
To be eligible for this relief, there is no requirement for you to be a relative of the person receiving the treatment – but the expenses must be paid by you for the provision of health care. If applicable, you will need to file details of the claim in your annual tax return and if your only income is employment salary, this is a relatively simple process via the Revenue myAccount portal.
Could I face tax bill after winning house in a draw?
Q I was incredibly lucky to win a house in a draw recently – which my family and I will be living in as we had never been in a position to buy our own home previously. I understand the recent Finance Bill brought in a number of changes around the tax treatment of non-cash prizes in raffles. Could those changes trigger a tax bill for me?
Leinster reader
A Generally lottery or prize winnings in Ireland are exempt from tax. From your perspective, the Finance Act will merely ensure that tax law and general practice align. As a result, tax – specifically Capital Acquisitions Tax (CAT) – will not arise on non-cash prizes won in raffles and draws, provided they are conducted in a bona fide manner.
The other change here will not impact you, but it is worth highlighting. The sale of an individual’s main residence is exempt from Capital Gains Tax (CGT – the tax paid on any profits made from the sale of an asset) and this also extends to situations where there is a disposal by means of raffle or lottery.
However, in these cases, the proceeds receivable by the homeowner could exceed the market value of the property. The new legislative change means that the CGT exemption will be limited to the gain on the market value of the property and the excess will be taxable.
