Capital Acquisitions Tax is the overall name for both gift and inheritance tax.
I am informed by the Revenue Commissioners that for the purposes of Capital Acquisitions Tax, the relationship between the person who provides the gift or inheritance (i.e. 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: €225,000 - 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: €30,150 - applies where the beneficiary is a brother, sister, a nephew, a niece or lineal ancestor or lineal descendant of the disponer.
Group C: €15,075 - applies in all other cases.
Any prior gift or inheritance received by a beneficiary since 5 December 1991 from within the same Group threshold is aggregated for the purposes of determining whether any tax is payable on the current benefit. Tax at the rate of 33% is payable on any excess received over the relevant tax-free threshold.
Ordinarily, a nephew or niece of a disponer is entitled to the Group B tax-free threshold of €30,150.
However, a nephew or niece who has worked substantially on a full-time basis for a period of five years prior to the gift or inheritance in carrying on, or assisting in the carrying on, the trade, business or profession, of the disponer is entitled to the Group A tax-free threshold of €225,000 for the purposes of computing the tax payable on any gift or inheritance received by him or her of those business assets.
This relief is known as favourite nephew or favourite niece relief and applies equally to a nephew or a niece who satisfies the conditions for the relief.
In order for the nephew or niece to be deemed to be working substantially on a full-time basis in the business he or she must work at least:
(a) more than 24 hours per week at the place where the business, trade or profession is carried on; or
(b) more than 15 hours per week at the place where the business, trade or profession is carried on exclusively by the disponer, any spouse or civil partner of the disponer and the nephew or niece.
This specific relief is targeted at gifts or inheritances of business assets in circumstances where the nephew or niece has, by their continued presence on a weekly basis, placed their labour and expertise at the disposal of the disponer thereby ensuring that material benefit is conferred on the business. The relief is designed to ensure that, in those circumstances, the higher Group A tax-free threshold of €225,000 is available to the deserving nephew or deserving niece.
The relief applies to gifts and inheritances of business assets in the circumstances outlined above. I do not consider it appropriate that this relief should be available to a nephew or niece who cares for an uncle but who does not fulfil the substantial full-time working in the business requirement.
