Select Committee on Finance and General Affairs debate -
Thursday, 11 May 1995

SECTION 157.

Mr. McCreevy

I move amendment No. 136:

In page 173, between lines 32 and 33, to insert the following subsection:

"(13) The Capital Acquisitions Tax Act, 1976 is hereby amended by the inclusion of the spouses of beneficiaries for all transactions under this Act, who will have an equal threshold, and this provision hereby includes all applications currently and in the future before the Revenue Commissioners.".

This section is a handy way for very rich people to be able to pay their taxes if they can give some heritage items to the State.

Mr. M. McDowell

I am worried that there seems to be an aggregate top limit of £500,000 in any year. I know of a case where somebody gave this State a Picasso, now in the National Gallery, and I would hate this system to inhibit gifts of that kind.

Mr. Quinn

The capping of the figure was really a budgetary one, we did not want all sorts of offers——

Mr. M. McDowell

They would not have to be accepted.

Mr. Quinn

No, but the suggestion was to make this provision and to see how it might work, it might be a way of giving very valuable artefacts to the State.

Mr. M. McDowell

What happens if somebody offers another Picasso to the National Gallery? This limit should not be there, we should not say that we will not take anything really big because there might be too much tax.

Mr. Quinn

If that happened, we would suggest keeping the offer on hold until the next financial year.

Mr. Cullen

The whole of the Mount Congriff estate was given to the State in lieu of taxes. Would this provision affect that?

Mr. Quinn

It is similar.

Mr. Cullen

Would it prevent that from happening?

Mr. Quinn

No, that is already catered for. This is where somebody has a tax liability and they wish to give a heritage item which would be valued independently and offset against taxes.

Mr. N. Treacy

It is very important for the Minister to consider this amendment and take it on board. It is discriminatory that where a person wills something to his son or daughter, when the transfer is taking place the spouse of the beneficiary does not qualify as a member of the family. The allowance has a limit of £10,000, whereas the limit is £150,000 in normal circumstances for the other person. If there was an equalisation of that, it would remove that discrimination. The State would not lose any money and would be facilitating the transfer of assets within the family.

Mr. M. McDowell

It should also apply to widows and widowers.

Mr. Quinn

For CAT purposes, the available tax free threshold depends on the relationship between the disponer and the beneficiary. For example, a child can receive a gift or inheritance of up to £178,200 in value from a parent without paying any CAT, assuming that the child had received no prior benefits. Similarly, the tax free threshold for brothers, sisters, nephews and nieces is £23,760 and for other relationships, that is, strangers, the threshold is now £11,880.

If I understand Deputy McCreevy correctly, what he is proposing in this amendment is that a beneficiary should be able to benefit from the higher threshold which may be applicable to his or her spouse. For example, where a person makes a gift to his daughter in law she would be entitled to class 1 threshold —£178,000 — as if the gift had been made to her husband rather than the class 3 threshold. If the husband was in fact the stranger, the daughter in law would be the beneficiary of the entitlement. I am opposed to this amendment for the following reasons.

First, it would facilitate the avoidance of CAT by encouraging gift splitting and would further reduce an already narrow CAT base. This cost would be anything up to £5 million per annum. Secondly, a son or daughter-in-law has no claim to greater equity than a brother, sister, nephew or niece. The existing differentials in the CAT thresholds follow a logical pattern; it is difficult to envisage a change for one relationship without corresponding changes for others. In this connection it is worth noting that the Succession Act does not recognise any moral claim by a son or daughter in law against a deceased person's estate.

Finally, under the existing CAT code where the spouse of a son or daughter-in-law is dead, then that son or daughter in law is entitled to the higher threshold belonging to the deceased spouse.

Amendment put and declared lost.

Section 157 agreed to.

NEW SECTION.

Mr. Quinn

I move amendment No. 137:

In page 173, before section 158, to insert the following new section:

158.—(1) In this section—

‘the Acts' means—

(a) the Tax Acts,

(b) the Capital Gains Tax Acts,

(c) the value-added Tax Act, 1972, and the enactments amending or extending that Act,

and any instruments made thereunder;

‘the scheme' means a scheme of the Department of Finance for the time being in force for requiring persons to show, by means of tax clearance certificates, compliance with the obligations imposed by the Acts in relation to the matters specified in subsection (2) before the award to them of contracts that are specified in a circular of the Department of Finance entitled "Tax Clearance Procedures Public Sector Contracts", numbered F 49/24/84 and issued on the 30th day of July, 1991, or any such circular amending or replacing that circular;

‘tax clearance certificate' shall be construed in accordance with subsection (2).

(2) Subject to the provisions of this section, where a person who is in compliance with the obligations imposed on the person by the Acts in relation to

(a) the payment or remittance of any taxes, interest or penalties required to be paid or remitted under the Acts to the Revenue Commissioners, and

(b) the delivery of any returns required to be made under the Acts,

applies to the Collector-General in that behalf for the purposes of the scheme, the Collector-General shall issue to the person a certificate (in this section referred to as ‘a tax clearance certificate') stating that the person is in compliance with the obligations aforesaid.

(3) A tax clearance certificate shall not be issued to a person unless

(a) the person, and any partnership of which the person is or was a member, in respect of the period of the person's membership thereof,

(b) in a case where the person is a partnership, each person who is a member of the partnership, and

(c) in a case where the person is a company, each person who is either the beneficial owner of, or able directly or indirectly, to control, more than 50 per cent. of the ordinary share capital of the company,

is in compliance with the obligations imposed on the person and each other person (including any partnership) by the Acts in relation to the matters specified in paragraphs (a) and (b) of subsection (2).

(4) Where a person (hereafter in this subsection referred to as ‘the first-mentioned person') applies for a tax clearance certificate in accordance with subsection (2) and the business activity to which the application relates was previously carried on by, or was previously carried on as part of a business activity carried on by, another person (hereafter in this subsection referred to as ‘the second-mentioned person') and

(a) the second-mentioned person is a company which is connected within the meaning of section 16 (3) of the Finance (Miscellaneous Provisions) Act, 1968, with the first-mentioned person or would have been such a company but for the fact that the company has been wound up or dissolved without being wound up, or

(b) the second-mentioned person is a company and the first-mentioned person is a partnership and

(i) a member of the partnership is or was able, or

(ii) where more than one such member is a shareholder of the company, those members acting together are or were able,

directly or indirectly, either on his, her or their own, or with a connected person or connected persons within the meaning of the said section 16 (3), to control more than 50 per cent. of the ordinary share capital of the company, or

(c) the second-mentioned person is a partnership and the first-mentioned person is a company and

(i) a member of the partnership is or was able, or

(ii) where more than one such member is a shareholder of the company, those members acting together are or were able,

directly or indirectly, either on his, her or their own, or with a connected person or connected persons within the meaning of the said section 16 (3), to control more than 50 per cent. of the ordinary share capital of the company,

then, a tax clearance certificate shall not be issued to the first-mentioned person unless, in relation to the business activity to which the application relates, the second-mentioned person is in compliance with the obligations imposed on that person by the Acts in relation to the matters specified in paragraphs (a) and (b) and subsection (2):

Provided that this subsection shall not apply to a business the transfer of which was effected before the 9th day of May, 1995, or a business the transfer of which is or was effected after that date if a contract for the transfer was made before that date.

(5) Subsections (4), (5) and (6) of section 242 of the Finance Act, 1992, shall, with any necessary modifications, apply to an application for a tax clearance certificate under this section as they apply to an application for a tax clearance certificate under that section.

(6) A tax clearance certificate shall be valid for the period specified therein.

(7) This section shall come into operation on the 1st day of July, 1995.".

Amendment agreed to.

Section 158 agreed to.