I appreciate that the Minister of State is not directly concerned with this matter but I hope he will pass my comments to the relevant Minister. I wish to raise the application of capital acquisitions tax, otherwise known as inheritance and gift tax, on dwellings and how certain classes of relatives are treated under this tax. The current tax thresholds are totally inadequate given the massive increase in house prices. During this period the thresholds have only been raised by very small amounts while house prices have doubled or trebled.
I accept that in the run up to the budget there are many conflicting and worthy demands. I am sure the Minister of State has received many such demands in the Department of Health and Children. However, I am particularly concerned about how certain classes of relatives are dealt with under this tax. My proposals repeat the suggestions outlined by the Opposition spokesperson on Finance, Deputy Noonan. One proposal is for the exemption of the family home from inheritance tax in circumstances where the beneficiary lives in the family home and it is his or her principal residence on the date prior to the death of the disponer. I am also seeking the reduction of the three class thresholds to two by amalgamating the two class thresholds regarding relatives. This would also encompass an increase in the exemption limit from £192,800 to £400,000 for the new class A, and from £20,000 to £30,000 for the new class B. There is also a proposal for a more benign regime for the transfer of farms and businesses.
It is clear that the exemption thresholds for inheritance tax have not kept pace with house price inflation. Many houses in Dublin which were purchased for less than £90,000 in the late 1980s are now worth £300,000, £400,000 and even £500,000. I will give an example of a middle aged woman who gave up work to look after her aged widowed mother. When her father died seven years ago the family home was worth £98,000. This woman's mother died last August and left her the family home and a small sum of money. When the funeral expenses were paid there was less than £1,000 left. The house is now worth £350,000 and this woman faces an inheritance tax bill of over £60,000. She has no money to pay the tax and, as she is not working, she does not have an income on which to raise a mortgage to pay the bill.
This woman has been an unpaid carer. As the Minister of State knows, these people receive much lip service but little practical help. If she sells her house she will not be able to purchase a cheaper house in the same area and may have to move to a different area, leaving behind friends and relatives she has known for a long time.
There are a number of issues which must be examined. We must look at the issue of siblings who live together, some of whom are on pensions, and live in a house they inherited or bought many years ago for a small sum of money but which is now worth several hundred thousand pounds. The sibling relationship is not dealt with satisfactorily by CAT as the threshold is far too low. There should be exemptions from CAT on inheritance of a family home where the deceased and the beneficiary both lived in the house as their principal residence immediately before the death of the deceased. The relief would apply to inheritance, not a gift. The category of beneficiaries should be extended to include unmarried couples in long or short-term relationships, including second marriages, children, and brothers and sisters living together. This provision would be subject to certain clawbacks and relief.
The need for change in this area speaks for itself, particularly in light of the increase in property values. There have been many hardship cases. Brothers and sisters, or children and parents who lived in a house for a long time, particularly if one has been a carer, should not have to sell the home and move ten or 15 miles away to get a new house. This case stands on its merits and I ask the Minister of State to respond positively or to raise this issue with the Minister for Finance.