Written Answers. - Capital Acquisitions Tax.
Seán Haughey
Question:
143
Mr. Haughey
asked the
Minister for Finance
the reliefs in place in relation to capital acquisitions tax in a situation where a close relative such as a sister, niece or nephew inherits or is gifted the family home; and if he will make a statement on the matter.
[10761/99]
Elderly siblings relief under capital acquisitions tax (CAT), which was introduced in 1991, recognises the special circumstances of elderly siblings living together and eases the tax burden associated with the inheritances of a "family" home 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 £150,000 or 80 per cent, whichever is the lesser. Given the current Class II threshold of £25,720, the share in the house passed by inheritance would have to be worth over £128,600 in order that tax be payable under this relief. This calculation assumes that no other gifts or inheritances have been received by the recipient since 2 December, 1988. This is a significant concession and should exclude most elderly siblings from paying CAT on the inheritance of all or part of their "family" home. 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 year's 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.
A broadly similar relief was introduced in the 1998 budget, to cater for the situations that arise where other close relatives, for example grandchildren or nieces-nephews, who have been resident with the disponer inherit their homes.
Conditions of the scheme are that the beneficiary must be a close relative of the disponer i.e. the relationship comes within those defined under the Class II threshold for CAT, both the disponer and the recipient must have been living in the house for ten continuous years immediately prior to the inheritance and the recipient cannot be the beneficial owner of any other house or part of another house. The five year continuous residence requirement has been extended to ten years in view of the fact that no age criterion will apply. The terms of the relief are similar to those of the elderly sibling relief, i.e. reduction in the value of the house for CAT purposes of 80 per cent or £150,000, whichever is the lesser.
These provisions address the situations the Deputy appears to have in mind. However, I recently undertook in the Dáil that prior to the next budget, I would examine the operation of the CAT code in detail. Reliefs in the CAT area are costly and, for this reason, must be looked at in a budgetary context when choices have to be made on which elements of the tax system to address.
