I have received correspondence from the Deputy with regard to the treatment under Capital Acquisitions Tax (CAT) of couples who are married, cohabiting or in a civil partnership and the CAT treatment of those who do not have children. The correspondence, which is an external legal opinion sought by the Deputy, suggests changes to the current CAT rules and treatment.
For the purposes of Capital Acquisitions Tax, the relationship between the person who provides the gift or inheritance and the person who receives the gift or inheritance determines the lifetime tax-free threshold (the Group Threshold) below which gift or inheritance tax does not arise. As Capital Acquisitions Tax is generally payable by the beneficiary, rather than the disponer, the system promotes horizontal equity in that all individuals with similar circumstances are treated in a similar manner.
It is a long-held principle of inheritance tax that transfers of assets between spouses are exempt. The spousal exemption from inheritance tax was extended to civil partners from 1 January 2011. Where a couple is cohabiting, rather than married or in a civil partnership, each partner is treated for the purposes of tax as a separate and unconnected individual.
Cohabitants do not have the same legal rights and obligations as a married couple or a couple in a civil partnership, which is why they are not accorded similar treatment to couples who have a civil status recognised in law. Any change in the tax treatment of cohabiting couples can only be addressed in the broader context of future social and legal policy development in relation to such couples.
I would say that where two people - irrespective of their relationship - share a home owned by one of them, and where the homeowner dies leaving that home to the other person, they can avail of the CAT dwelling house exemption, once other conditions of the relief are met.
As regards the treatment of individuals with no children, gifts or inheritances from them are subject to either category B or C thresholds irrespective of their individual status. There would be a significant potential Exchequer cost with the extension of the Category A threshold to allow individuals with no children to nominate a potential beneficiary.
Apart from the potential legal difficulties of any change in the treatment of cohabitants, which is a broader policy issue than just CAT, there would be potentially significant Exchequer costs in changing the current CAT rules.