Will the Minister justify the inclusion of this section?
SECTION 137.
Question proposed: "That section 137 stand part of the Bill."
Since 1990 the capital acquisition thresholds have been indexed each year by reference to the increase in the consumer price index. The amendment alters the method by which those thresholds are indexed. Benefits from a parent are entitled to a tax free class threshold of £174,000, those from a brother or sister are entitled to one of £23,200 and those from a stranger are entitled to one of £11,600. Benefits taken from different sources aggregate for the purpose of ascertaining the rate of tax on the current benefit, but the tax free threshold that applies in relation to the current benefit, called the threshold amount, is determined by a complicated formula designed to ensure the same overall tax is payable independent of the order in which benefits are taken. In most cases benefits are taken from only one class of disponer and the individual's tax free threshold is the relevant index class threshold. The 1990 legislation indexes the threshold amount instead of the class thresholds. This has resulted in a serious anomaly whereby a person who has received a prior aggregate benefit can pay less tax on a later benefit than would be the case if he or she had received no prior benefit. That is inequitable. This section amends the law to ensure that in future only class thresholds are indexed and not threshold amounts.
Under this legislation in the aggregation of gifts could a person who is given a set of two smaller gifts have to pay more tax than someone who received two bigger ones? This is a complex matter. If A receives an aggregate gift of £130,000 from his or her father in 1991 and B receives one of £170,000 from his or her uncle in 1993, is it correct that B will be liable for less tax than A?
That was the case and that is why the section is being amended.
That was the case heretofore.
The Deputy's interpretation is correct. I was advised that people who received two lower aggregate amounts were paying higher tax than those who received higher amounts. That issue arose frequently. Section 137 is a complicated one and if Deputy Yates would like some information on it I will pass it to him.
That would be helpful.
Question put and agreed to.