Dáil Éireann Debate, Tuesday - 13 June 2023
386. Deputy Michael Healy-Rae asked the Minister for Finance his views on whether it is time that the Government takes a serious look at the €330,000 exemption for children who have an inheritance left to them, given the ever-increasing values in property, and so on (details supplied); and if he will make a statement on the matter. [28070/23]
View answerAs the Deputy may be aware, for Capital Acquisitions Tax (CAT) purposes, the relationship between the person giving a gift or inheritance (i.e. the disponer) and the person who receives it (i.e. the beneficiary) determines the maximum amount, known as the “Group threshold”, below which CAT does not arise.
The Group A threshold (currently €335,000) applies, inter alia, where the beneficiary is a child (including adopted child, stepchild and certain foster children) of the disponer. The Group B threshold (currently €32,500) applies where the beneficiary is a brother, sister, nephew, niece or lineal ancestor or lineal descendant such as a grandchild of the disponer. The Group C threshold (currently €16,250) applies in all other cases.
Any prior gift or inheritance received by a beneficiary since 5 December 1991 from within the same Group threshold is aggregated for the purposes of determining whether any tax is payable on a benefit. Where a person receives gifts or inheritances that are in excess of his or her relevant tax-free threshold, CAT at a rate of 33% applies on the excess benefit.
It is also worth noting that where a person leaves the family home to his or her next of kin, the beneficiary may be in a position to avail of the dwelling house exemption. To qualify for the exemption, the inherited property must have been the deceased person’s principal private residence at the date of death. This requirement is relaxed in situations where the deceased person left the property before the date of death due to ill health; for example, to live in a nursing home. The beneficiary must also have lived in the house for 3 years prior to the date of the inheritance and must continue to live in the house for 6 years after that date. In addition, the beneficiary must not have a beneficial interest in any other residential property. Detailed guidance on the dwelling house exemption is available on the Revenue website at: www.revenue.ie/en/tax-professionals/tdm/capital-acquisitions-tax/cat-part24.pdf.
In Budget 2019, the Group A threshold which applies primarily to gifts and inheritances from parents to their children was increased from €310,000 to €320,000 and again to €335,000 in Budget 2020. This increase was in response to concerns about the potential tax burden in particular on the inheritance of the family home.
The options available for providing increases to CAT thresholds are considered in the context of available resources as part of the annual budgetary process and like all matters need to be balanced against competing demands. Recent Revenue estimates indicate that the cost of increasing the Group A threshold to €400,000, would be €47m.
