Dáil Éireann debate -
Thursday, 29 Jun 1995

Vol. 455 No. 3

Written Answers - Capital Acquisitions Tax.

Noel Ahern

Question:

50 Mr. N. Ahern asked the Minister for Finance the current position regarding inheritance tax on residential houses, particularly as it affects brothers and sisters; if he will waive the tax within the one generation and take brothers and sisters as one unit; if he will give details of current tax thresholds, when these were established, when inheritance tax was established, if the thresholds have increased in line with house property prices; and if it was ever intended that normal houses would become liable. [12127/95]

Minister for Finance (Mr. Quinn)

The rationale for capital acquisitions tax, CAT, which was introduced in 1976, is that benefits received by way of gift or inheritance increase a person's resources and should therefore be taxable just as income receipts are taxable. CAT is payable by the beneficiary and all property inherited since 1 April 1975, including residential houses, is potentially liable to tax. The liability of residential houses to inheritance tax depends on:

— the value of the house at the relevant valuation date, normally the date on which the beneficiary receives the inheritance;

—the amount of prior aggregable gifts/inheritances taken by the beneficiary; and

—the relationship between the deceased and the beneficiary.

There are no special reliefs under CAT for residential houses except where elderly brothers or sisters were living together in the same house. In such situations, relief is available if a brother or sister of the deceased inherits a house or part of a house and if the beneficiary is aged 55 or over; has lived in the house with the deceased brother/sister for at least five years prior to the date of death; and owns no other residential property.

If these conditions are satisfied, then the value of the house or part of the house is reduced for inheritance tax purposes by 60 per cent or £60,000 whichever is the lesser figure.

While transfers between spouses are exempt from CAT, it would not be appropriate to provide similar treatment for transfers between brothers and sisters as to do so would be inconsistent with the basic principles underlying this tax. In addition to the reliefs available for elderly brothers and sisters, there are hardship provisions under the CAT code which allow for postponement of the tax until the property is sold or passed on to the next generation.

Details of the current CAT thresholds, which were introduced in 1984 and indexed since 1990, are set out in the following Table:

Table

	£
Class I (applies where the beneficiary is a child or a minor child of a deceased child of the disponer)	178,200
Class II (applies where the beneficiary is a lineal ancestor, a lineal descendant (other than a child, or a minor child of a deceased child), a brother/sister, or a child of a brother/sister of the disponer)*	23,760
Class III (applies to beneficiaries other than those covered by Classes I and II)	11,880

* A parent, nephew or niece may qualify for the Class I threshold in certain circumstances.

While the thresholds have not been indexed in line with those prices, provision was made in 1990 to index the then existing thresholds in line with the consumer price index in respect of benefits taken on or after 1 January 1990.