Tuesday, 3 December 2019

Questions (142)

Michael Healy-Rae

Question:

142. Deputy Michael Healy-Rae asked the Minister for Finance if he will address a matter (details supplied) regarding the capital aquisitions tax; and if he will make a statement on the matter. [50181/19]

View answer

Written answers (Question to Finance)

For the purposes of Capital Acquisitions Tax (CAT), 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. CAT applies, at a rate of 33%, on the excess over the tax free threshold. As CAT 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.

The three thresholds are as follows:

- Group A (€335,000) applies where the beneficiary is a child of the disponer.

- Group B (€32,500) applies where the beneficiary is a brother, sister, niece, nephew, or lineal ancestor or lineal descendant of the disponer.

- Group C (€16,250) applies in all other cases.

Those who inherit or receive gifts from a disponer who is not their parent will generally fall within either the category B or C thresholds. There would be a significant exchequer cost to any increase in these thresholds.

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.

Depending on the circumstances, there are reliefs available irrespective of the relationship between the individuals concerned, including agricultural relief, business relief and CAT Favourite Niece or Nephew Relief.

Gifts are generally taxable in the same way as inheritances. There is an annual €3,000 CAT relief available to all recipients of gifts, and this does not depend on the relationship of the individuals concerned.

There are some CAT reliefs which are available for cohabiting individuals. Cohabiting individuals can avail of the ‘dwelling house exemption’ to bequeath their principal private residence, generally the most substantial asset owned by an individual, free from inheritance tax. This relief is available to people who share a home and meet the conditions of the relief and it is not dependent on the relationship between them.

With regard to the gifting of a shared home, the treatment of gifting was amended substantially in the 2016 Finance Act. In general, it is now only possible to receive a tax-free gift of a dwelling house where it is gifted to a dependent relative. This change was made to restore the original policy aim of the relief.

Section 88A of the Capital Acquisitions Tax Consolidation Act 2003 exempts transfers of property made between qualified cohabitants within the meaning of Part 15 of the Civil Partnership and Certain Rights and Obligations of Cohabitants (CPCROC) Act 2010. This is a redress scheme available, which provides protection in law for long-term cohabiting couples and provides safeguards for an economically dependent cohabitant where a relationship has ended, or on death. The introduction of the exemption from CAT in these cases was not intended to give cohabiting couples the same tax treatment as married couples or civil partners, but simply legislated for the tax consequences of the redress arrangements for cohabitants under the CPCROC Act 2010.

Any change in the tax treatment of cohabiting couples, including with respect to CAT, can only be addressed in the broader context of future social and legal policy development in relation to such couples. There would also be potentially significant Exchequer costs in changing the current CAT rules to accommodate the changes sought by the Deputy.

If the taxpayer has any specific matters which they would like to discuss directly with Revenue they may contact Revenue through their local office, providing further detail of their circumstances. Alternatively, the National Capital Acquisitions Tax Unit of Revenue can be contacted at 01-7383673.