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Dáil Éireann debate -
Thursday, 3 May 2001

Vol. 535 No. 3

Written Answers - Capital Acquisitions Tax.

Noel Ahern

Question:

106 Mr. N. Ahern asked the Minister for Finance the threshold for capital acquisitions tax between siblings not living together; the reason the £10,000 threshold as set in 1976 has not been inflation linked; the current level of the threshold; the level it would be if inflation indexed since 1976; if he will adjust the threshold to the index linked level in the next budget; and the reason farmers only pay a fraction of capital acquisition tax due whereas others with assets in private houses pay the full rate. [12710/01]

The capital acquisitions tax, CAT, exempt threshold now applying on transfers between siblings is £31,680. When CAT was first introduced in 1976, this threshold was £10,000. If this figure had been indexed linked to the consumer price index since 1976, the amount which would now apply is approximately £53,000. The three exemption thresholds applying for gifts and inheritances have been indexed annually to the consumer price index since 1990. In addition, I increased these three threshold amounts in the budget 2000, including the threshold for transfers between siblings from £25,720 to £30,000.

As the Deputy is aware, I also introduced other substantial changes to the CAT legislation in budget 2000. In addition to increasing the three tax free thresholds for gifts and inheritances, I introduced a single CAT rate of 20% to replace the previous rates of 20%, 30% and 40%. I also introduced a dwelling house exemption whereby the transfer of a shared family home is exempt from CAT, subject to certain conditions.

These measures will reduce the CAT liability of all beneficiaries, including siblings. The significant package of measures contained in budget 2000 constitutes the biggest single easement in the structure of CAT since its introduction in 1976. When considering the increase in the three exempt thresholds in budget 2000, I decided against further increases because of Exchequer costs. However, the issue of CAT will be kept under review.
Farmers can avail of an agricultural relief under the CAT legislation. This relief allows the value of gifts or inheritances received to be reduced by 90% for CAT purposes, subject to certain qualifying conditions. Agricultural relief applies only where the beneficiary's assets are 80% or more made up of agricultural assets after the gift or inheritance. Qualifying agricultural assets include land, buildings, livestock and machinery. There is also a CAT business relief available which also allows a 90% CAT reduction for qualifying business assets subject to certain conditions. The rationale for both of these reliefs is to enable family-owned businesses or farms to transfer to the next generation and in the case of the farmers to take account of the fact that the current market value of agricultural land is frequently much higher than is justified by its earning potential.
In relation to individuals who inherit a private house other than the house they have been living in, the normal market value rules apply, as is the case with most assets.
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