Dáil Éireann debate -
Wednesday, 30 Jun 1999

Vol. 507 No. 3

Written Answers. - Inheritance Tax.

Noel Ahern

Question:

141 Mr. N. Ahern asked the Minister for Finance the way in which inheritance tax is operated; the way in which a woman who lived with and was reared by her aunt from five years of age can be treated as a daughter for tax purposes; the evidence or proof which should be acceptable to the Revenue Commissioners in these cases; and if he will make a statement on the matter. [16945/99]

Minister for Finance (Mr. McCreevy)

Capital acquisitions tax is levied on the recipient of gifts and inheritances. Transfers between spouses, however, are exempted from CAT. The tax is charged on the value of the gift or inheritance in excess of the relevant exempt threshold. There are three exempt thresholds as follows: Class I: £192,900 – where the recipient is a child, or minor child of a deceased child, i.e. certain grandchildren. This threshold also applies to a parent where he or she takes an absolute inheritance on the death of a child; Class ll: £25,720 – where the recipient is a brother, sister, nephew, niece, lineal ancestor or lineal descendent, other than those covered by Class I; Class III: £12,860 – where the recipient does not fall within Classes I or II i.e. non-lineal relations and strangers.

Since 1990, these thresholds have been indexed to the CPI on a yearly basis.

Where a beneficiary has received previous gifts or inheritances since 2 December 1988, the value of these benefits must be taken into account for the purposes of determining the current liability to tax.

The rules for computing, both gift and inheritance tax are the same, except that gift tax is charged at 75 per cent of the inheritance tax rates. The current rates applying, to gifts and inheritances are as follows:

	Gifts	Inheritances
Threshold Amount	Nil	Nil
Next £10,000	15 per cent	20 per cent
Next £30,000	22.5 per cent	30 per cent
Balance	30 per cent	40 per cent

Stepchildren and legally adopted children are entitled to the £192,000 threshold. Close relatives such as nephews or nieces who have been resident with the disponer of the inheritance, may avail of the close relatives relief whereby the value of the shared residence may be reduced for tax purposes by 80 per cent or £150,000, whichever is the lesser. Both the disponer, in this case the aunt, and the recipient, the niece, must have been living in the house for ten continuous years immediately prior to the inheritance and the recipient must not be beneficially entitled to any interest in any other dwelling-house.

A nephew or niece of a disponer is treated as a child of the disponer in respect of a benefit comprising business or farming assets if the nephew or niece has worked substantially on a full-time basis for the disponer in the five years ending on the date of the benefit.

In order to avail of the £192,900 threshold, a nephew or niece must be able to show that the benefit consisted of business or farming assets, or shares in a trading company, and that he or she has worked in the business throughout the relevant five year period for more than 24 hours a week, or for more than 15 hours a week where the business concerned is carried on exclusively by the disponer, any spouse of the disponer and the nephew or niece concerned.

In regard to evidence or proof that the person qualifies for any of these reliefs, I would like to remind the Deputy that inheritance tax is a self-assessment tax. In a situation where the case is selected for audit, it would be up to the individual claiming the relief to provide sufficient evidence to support their claim. I am informed by the Revenue Commissioners that there are no specific requirements in the legislation concerning the type of evidence required. However, a claimant may be required to corroborate any claim by reference to independent evidence from third parties. In the case of the close relative's relief, production of documentary proof that the individual has resided with the disponer, which is a condition of the relief, may also be sought.