Terence Flanagan
Question:118 Deputy Terence Flanagan asked the Minister for Finance the position regarding the universal social charge (details supplied); and if he will make a statement on the matter. [6271/12]
View answerTuesday, 7 February 2012
Questions (69, 70)
Written answers
The Universal Social Charge (USC) was introduced in Budget 2011 and replaced the Health Levy and the Income Levy. It is a more equitable charge and has a wider base and a lower rate when compared to the combined impact of the Income and the Health Levies. As with all taxes, receipts from the USC form part of the collective contribution to the funding of public services.
Brendan Smith
Question:119 Deputy Brendan Smith asked the Minister for Finance if he will clarify the situation in regard to the right of a parent to gift a second home to a son or daughter without it affecting capital acquisition tax or inheritance taxes; if the matter will be confirmed and conditions outlined; and if he will make a statement on the matter. [6304/12]
View answerFor the purposes of Capital Acquisitions Tax (gift and inheritance tax), the relationship between the person who provides the gift or inheritance (known as the "disponer") and the person who receives the gift or inheritance (i.e., the beneficiary), determines the maximum tax-free threshold (known as the "group threshold") below which gift or inheritance tax does not arise. There are, in all, three separate group tax-free thresholds based on the relationship of the beneficiary to the disponer.
Group A: €250,000 —applies where the beneficiary is a child (including adopted child, step-child and certain foster children) or minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an inheritance of an absolute interest from a child. Group B: €33,208 —applies where the beneficiary is a brother, sister, a nephew, a niece or lineal ancestor or lineal descendant of the disponer. Group C: €16,604 —applies in all other cases.
When calculating whether a beneficiary has received benefits in excess of her/his group tax-free threshold, any other gifts or inheritances received by that beneficiary since 5 December 1991 from within the same group are also taken into account.
A son or daughter who takes a gift or an inheritance from their parents falls into the Group A threshold above.
Apart from the tax-free group thresholds available to a beneficiary, the Capital Acquisitions Tax code also exempts a gift or an inheritance of a dwelling house completely from gift or inheritance tax in certain circumstances.
Where a parent transfers by way of gift a dwelling house, which is not the only or main residence of the parent, to a son or daughter, that gift will be exempt from gift tax if the son or daughter has resided in that dwelling house for a minimum of three years prior to the gift and if the son or daughter does not have an interest in any other dwelling house. In addition, the son or daughter must continue to occupy that dwelling house as his or her only or main residence for a period of six years from the date of the gift.
If, therefore, the conditions for the dwelling house exemption are met by the son or daughter, the gift of the second home will be completely exempt from gift tax and the gift will not reduce the Group A tax-free threshold available to the son or daughter of €250,000, which will still be in place in respect of any other gifts or inheritances that the son or daughter may receive from their parents in the future.