Michael Healy-Rae
Question:64. Deputy Michael Healy-Rae asked the Minister for Finance if he will address a matter (details supplied) regarding inheritance tax; and if he will make a statement on the matter. [12084/20]
View answerTuesday, 23 June 2020
Questions (64)
Written answers
The standard rate of Capital Acquisitions Tax is 33%. There are three tax-free thresholds depending on the relationship between the disponer and the beneficiary, with CAT applying on the amount inherited or gifted over the thresholds, as follows:
- Group A threshold (€335,000) - Applies where the beneficiary is a child (including certain foster children) or minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an absolute inheritance from a child.
- Group B threshold (€32,500) - Applies where the beneficiary is a brother, sister, niece, nephew, or lineal ancestor or lineal descendant of the disponer.
- Group C threshold (€16,250) - Applies in all other cases.
All gifts/inheritances received since 1991 from all disponers in the relevant group must be aggregated together when calculating the taxable value. The balance of gifts or inheritance above the threshold is taxable.
I am advised by Revenue that the date on which capital acquisitions tax (CAT) is payable is determined by the ‘valuation date’ on which the market value of the property included in a gift or an inheritance must be established. Where this date is between 1 January and 31 August, CAT is payable by 31 October in the same year. Where this date is between 1 September and 31 December, CAT is payable by 31 October in the following year.
Section 30 of the Capital Acquisitions Tax Consolidation Act 2003 contains the rules for determining the valuation date. The valuation date depends on the circumstances particular to a case and is not a fixed date in relation to all gifts and inheritances. In the case of a gift, the valuation date is generally the date on which the property is given to a beneficiary. In the case of an inheritance, however, it can be earlier as it is the date on which the executors of the will become entitled to retain the property for the benefit of a beneficiary. Generally, this is the date on which probate or administration is granted.
Where the benefit consists of property, it may well be the case that CAT is payable before a beneficiary has received the property due to a delay in completing the administration of an estate. Equally, where a beneficiary has actually received the property, CAT may be payable before a beneficiary has had the opportunity to sell that property and pay the tax liability. Outside of the current COVID-19 circumstances, the length of the conveyancing process is such that it is often the case that a CAT liability arises before a property can be sold to pay that liability. To provide for such situations, taxpayers have a statutory entitlement to payment by instalments in certain circumstances. Monthly instalment payments for up to five years may be allowed subject to the payment of interest at an annual rate of 8%. However, Revenue has discretion to allow payment of CAT by instalments over a longer period in exceptional circumstances where the tax cannot be paid without excessive hardship.
In such circumstances, Revenue also has discretion to allow payment to be postponed for such period and on such terms (including the waiver of interest) as it thinks fit. Revenue will consider each case on its merits, taking into account both the financial circumstances of the beneficiary and the nature of the gift or inheritance involved.