Written Answers - Probate Tax.
Enda Kenny
Question:
170
Mr. Kenny
asked the
Minister for Finance
if he will clarify the position in so far as the transfer of lands and property within families is concerned arising from changes made in the Finance Act, 2001, particularly in relation to the abolition of probate tax; if any duties are payable to the State on the transfer of small land holdings between family members; if a valuation or income threshold applies; and if he will make a statement on the matter.
[14192/01]
In general, transfers of land and property within families are liable to stamp duty on the market value of the property. However, there is a 50% reduction on the standard stamp duty rates on transfers between specified close relatives. In addition, such transfers would be liable to CGT also based on the market value of the site.
In budget 2001, I introduced a relief whereby neither stamp duty nor CGT will apply on the transfer of a site from a parent to a child on or after 6 December 2000 provided it is for the construction of the child's principal private residence and the market value of the site does not exceed £200,000. It will also be a condition that a parent can only transfer one site to each child for the purposes of this exemption. If such a site is subsequently sold by the child without the principal private residence having being constructed and lived in for three years, there will be a clawback of the CGT relief allowed on the transfer from the parent to the child except in the case of the death of the child or where he or she transfers his or her interest or part of the interest in the land to his or her spouse.
The purpose of this relief is to encourage parents to transfer a site to their children during the parent's lifetime, thereby helping to increase housing supply. Where such a transfer takes place on death, it has always been the position that there is no charge to stamp duty and CGT. There is no exemption from capital acquisitions tax – CAT – on such transfers. However, the exemption threshold currently applying for gifts/ inheritances from a parent to a child is £316,800. Consequently, such transfers would in most, if not all, cases be exempt from CAT as the market value of the site must not exceed £200,000. A charge to CAT may only arise if the child had received previous gifts from the parent since 2 December 1988. Under the CAT aggregation rules, the value of such previous benefits must be taken into account for the purposes of determining the current, if any, liability, to tax. A threshold of £31,680 applies to gifts/inheritances where the recipient is a brother, sister, nephew, niece, lineal ancestor or lineal descendent of the disponer.
In addition, there are various reliefs applying under the CAT legislation including agricultural relief and business relief. Agricultural relief operates by allowing the value of agricultural land, buildings, livestock and machinery to be reduced by 90% for the purposes of calculating the value for CAT. This 90% relief applies to agricultural assets received both by inheritance and gift. Agricultural relief applies only where the beneficiary's agricultural assets after the gift or inheritance are 80% or more of total assets. Business relief operates by allowing the value of certain businesses or the value of shares in certain companies to be reduced by 90% subject to a minimum period of ownership by the transferor prior to the gift or inheritance in question. Gifts and inheritances of the "family home" taken on or after 1 December 1999 are also exempt from CAT subject to certain conditions regardless of the nature of the relationship between the disponer and the recipient.
At present, there is also full stamp duty relief for qualified young trained farmers on transfers of any type of agricultural land subject to certain conditions. The aim of this relief is to promote lifetime transfers of land and encourage more young people to pursue farming. No other sector can avail of such a generous relief.
In relation to probate tax, I abolished this tax in budget 2001 in respect of deaths occurring on or after budget day, 6 December 2000. In the case of probate tax arising on estates where the death occurred before 6 December 2000, the tax is charged at a rate of 2% on the net value of non-exempt assets left by a deceased whether the assets passed under will or intestacy. Estates with a taxable value of £40,000 or less are exempt from the tax. A total exemption from probate tax is available where property passes to a spouse and where jointly-owned property passes automatically from one joint owner to another joint owner. In addition, the share of the family home passing to dependent children or dependent relatives of the deceased is exempt subject to certain conditions. There are other exemptions for pension benefits, charitable bequests, heritage property and the proceeds of section 60 insurance policies, which are used to pay inheritance tax/probate tax. Agricultural land and buildings may also be reduced in value by 30% for probate tax purposes. There is also provision in the legislation for deferral of the tax by the Revenue Commissioners in cases of hardship or where the estate is illiquid.
