Dáil Éireann Debate, Tuesday - 5 October 2021
193. Deputy Matt Carthy asked the Minister for Finance if he has considered changing favoured successor rules with regard to agricultural relief capital acquisition tax; and if he will make a statement on the matter. [48074/21]
View answerWith regard to favoured successor rules in the Capital Acquisitions Tax (CAT) regime, the Deputy should note that there is already a Favourite Nephew/Niece relief in place which allows a nephew or niece to be treated as a child for CAT purposes, subject to certain conditions. This means that they are entitled to the Group A tax-free threshold of €335,000.
The aim of this relief is to target a nephew/niece who worked for the aunt/uncle over a 5-year period prior to inheritance for a minimum number of hours per week, putting their labour and expertise at the disposal of the aunt/uncle and making a sustained contribution to the business before inheritance.
When combined with CAT Agricultural Relief, this relief is intended to support the intergenerational transfer of a family farm and is particularly important in circumstances where a farmer may not have had a direct descendant (e.g. child) to whom they may bequeath the family farm.
I believe that extending the relief to allow for the nomination of a ‘Favourite Successor Relief’ would represent a significant departure from the current CAT regime, as well as a departure from the policy rationale of the Favourite Nephew/Niece Relief.
This would most likely be followed by pressure to extend this to other reliefs (e.g. business), or more broadly for disponers to seek to nominate a ‘Favourite Successor’ for their estate.
Such a fundamental departure from the current CAT regime would lead to an erosion of the revenue base. For example, this could result in a beneficiary currently categorised as a “Stranger in blood” (Group C threshold €16,250) being entitled to the same threshold as a child of the disponer (Group A threshold €335,000).
I have no plans to change the favoured successor rules at this time.
