Tuesday, 11 December 2018

Questions (130)

Robert Troy

Question:

130. Deputy Robert Troy asked the Minister for Finance his plans to amend the deed of family arrangement (details supplied); and if he will make a statement on the matter. [51705/18]

View answer

Written answers (Question to Finance)

I am advised by the Revenue Commissioners that the Capital Acquisitions Tax Consolidation Act 2003 allows for the re-distribution of assets that are to be transferred in a will or under the rules of intestacy in limited circumstances. Before receiving an asset to which a person is entitled, the person may disclaim or refuse the asset. However, a disclaiming beneficiary cannot choose who will then get the disclaimed asset which becomes part of the residue of the deceased person’s estate and is distributed accordingly. A recipient of the disclaimed and re-distributed asset is then treated as having received a taxable inheritance from the deceased person. 

In contrast, a re-distribution of assets received by family members under a deed of family arrangement gives rise to two potential charges to capital acquisitions tax; i.e.

1. a potential inheritance tax charge for the original beneficiary on his or her inheritance from the deceased person, and

2. a potential gift tax charge for the beneficiary receiving the asset under the deed of family arrangement from the original beneficiary.

As far as capital gains tax is concerned, deeds of family arrangements do not give rise to a charge to tax if certain conditions are met. Section 573 of the Taxes Consolidation Act 1997 provides that any variation made by deed of family arrangement in respect of the deceased person’s assets between family members within 2 years after the date of death (or such longer period as the Revenue Commissioners may allow) is to be regarded as made by that person at the time of his or her death.

It is worth noting that the tax treatment of gifts and inheritances in this State and in the U.K. is not directly comparable. The U.K. tax authorities apply a different basis of taxation whereby it is the value of the estate of the deceased person that is taxed and not the recipients of the assets as happens in this State. A further difference between the tax treatment in both jurisdictions is that the receipt of gifts is not generally taxable in the U.K.

I have therefore no plans to make any changes to the current tax treatment for CAT or CGT in this regard.