Vol. 478 No. 6
7 Miss Quill asked the Minister for Finance the proposals, if any, he has to deal with the escalating tax burden by way of inheritance tax on persons who inherit their family home from an uncle, aunt, brother, sister or other close relative; and if he will make a statement on the matter. [11668/97]
Capital Acquisitions Tax, CAT, is due whenever a person receives a gift or an inheritance, subject to certain exemptions, thresholds and reliefs. One such relief which is available under the CAT code exists where property is inherited from an elderly sibling with whom the beneficiary has been living. This relief, introduced in 1991, recognises the special circumstances of elderly siblings living together and eases the tax burden associated with inheritances in such situations. The relief allows the value of a house or part of a house which is inherited to be reduced for CAT purposes by 60 per cent or £60,000 whichever is the lesser. The original relief had a threshold of £50,000 or 50 per cent and this was subsequently increased to £60,000 or 60 per cent with effect from April 1995.
To qualify for this relief the successor must fulfil the following conditions: be either a brother or sister of the disponer; have attained the age of 55 years; have resided in the house with the deceased sibling — disponer — continuously for a period of not less than five years ending on the date of the inheritance and not be the beneficial owner of any other house or an appropriate part of any other house.
The relief works as follows: an elderly person might share a house worth £120,000 jointly with a brother or sister. On inheriting their sibling's share worth £60,000 the individual would be entitled to reduce this inheritance by 60 per cent to £24,000. Given the Class II CAT - free threshold of £24,740 for the 1997 calendar year, this inheritance of a half share in a house worth £120,000 would result in no CAT being paid.
Yesterday on Report Stage of the Finance Bill, I introduced an amendment to this relief which has the effect of increasing the existing threshold of £60,000 to £80,000 in the case of the elderly siblings' relief. This increase is based on the increase in the average house prices since the threshold was previously increased. I am confident that such a move will greatly satisfy the increasing concerns of elderly siblings living together.
A general tax exemption for close relatives of the disponer who inherit a house in which they are already residing could have significant Exchequer cost implications and would significantly reduce the yield from CAT. Finally, in cases where payment of inheritance tax would cause excessive hardship for the beneficiary, the Revenue Commissioners will consider proposals for the postponement of the payment of the inheritance tax. Accordingly, I do not propose extending the sibling relief further.
As we did not have the time yesterday to discuss the increase, which I noted, it went through without discussion. It was provided for by the Minister in response to the discussion on Committee Stage. Will he agree there are many situations where this sibling relief is not adequate to deal with the matter? One can have complicated arrangements where a cousin brought up by the family lives in the home — a quasi-sibling. In others, one has nephews and, particularly, nieces living in the same house looking after elderly uncles and aunts, doing what their mother used to do and performing the exact same social functions, in terms of being a carer. I received a letter from an elderly lady in the north Dublin suburbs in which she stated that the arrangements she had made in relation to her niece were unravelling and that her niece will be plunged into an economic disaster when she dies. Will the Minister agree that, while there has been some movement on the financial side, there are relatives — nieces, nephews and first cousins — who do not have a share in the home but who regard it as their family home? They should qualify for the same relief.
This issue was the subject of an extensive debate on Committee Stage when I was disposed to move in the direction outlined by the Deputy. The difficulty was that, in the limited time available between Committee Stage and Report Stage, we were not able to calculate the cost of the proposed change. There is no argument in equity against it. Where it is the inheritor's principal residence in which he or she has lived for a specified period — a period of five years is specified in the legislation — and there is no entitlement to a share in any other property or residence, the logic behind the proposal is acceptable. The matter should be addressed in the next Finance Bill. The Deputy has referred to one case, I can think of others. It is likely the number will increase. No taxation relief should be provided, however, unless one has some idea of what the cost will be. We will have to examine CAT returns to calculate the total loss, in terms of yield, and to determine the conditions that should apply.
