Dáil Éireann debate -
Tuesday, 11 Mar 2003

Vol. 563 No. 1

Written Answers - Tax Code.

John Cregan

Question:

246 Mr. Cregan asked the Minister for Finance the threshold between siblings not living in the same house in regard to rules in relation to inheritance tax; if an inheritance of farmland between siblings is treated differently if the recipient is a farmer or non-farmer; and if unzoned land is valued at its agricultural value, development or hoped for value. [7043/03]

Minister for Finance (Mr. McCreevy)

The taxation of inheritances is governed by the capital acquisitions tax– CAT – code. Under this code, a person can take inheritances under three different group thresholds before being liable to CAT at 20%. These thresholds are as follows:

– €441,198 – Group A – where the recipient is the child of the disponer,

– €44,120 – Group B – where the recipient is a brother, sister, nephew, niece, lineal ancestor or lineal descendent, other than those covered by Group A, and

– € 22,060 – Group C – all other cases.

These amounts are indexed linked, and rise each year in line with inflation, and generally the market value of the inheritance is the value used for the purpose of these thresholds.

The threshold for inheritances between siblings is therefore €44,120, assuming that the beneficiary has taken no prior benefits in group B since 5 December 1991. Where siblings live in the same family home, they would avail of the general exemption on the transfer of the family home if certain conditions are fulfilled.

In the context of an inheritance involving farmland, the recipient may be entitled to a relief known as agricultural relief. This applies in the case of a gift or inheritance of agricultural land, where the recipient is a farmer. For the purpose of the relief, farmers are defined as individuals domiciled in Ireland, where 80% of the value of their assets after taking the gift or inheritance is represented by agricultural property.

The relief operates by reducing the market value of agricultural property by a flat rate of 90%, so that the tax is calculated on an amount – known as the agricultural value – which is substantially less than the market value. Therefore, depending on the circumstances, it is possible that a person may inherit as much as €441,200 of farmland in market value terms from his or her siblings before incurring a CAT liability. The market value is determined by reference to recent sales of comparable land.