Michael Healy-Rae
Question:184. Deputy Michael Healy-Rae asked the Minister for Finance if he will address a matter (details supplied); and if he will make a statement on the matter. [41314/23]
View answerTuesday, 26 September 2023
Questions (184)
Written answers
As the Deputy is aware, Capital Acquisitions Tax (CAT) is a tax which applies to both gifts and inheritances. For 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 is currently set at €335,000 and applies where the beneficiary is a child, including adopted children, stepchildren and certain foster children, of the disponer.
The Group B threshold is currently set at €32,500 and 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 is currently set at €16,250 and applies in all other cases.
While the thresholds were reduced during the economic downturn, the Government has made significant changes to the CAT thresholds in recent years. The thresholds have been increased to the extent allowable by the available resources. 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.
There are also a number of important reliefs and exemptions available from CAT.
Agricultural Relief is available for agricultural land. Farmers, subject to meeting the relevant criteria, can avail of a 90% relief on the value of agricultural land so that the gift or inheritance tax is calculated on an amount - known as the 'agricultural value' - which is substantially less than the market value.
A similar relief is available in respect of certain businesses whereby a 90% reduction in respect of the taxable value of relevant business property can be applied when calculating CAT, provided the relevant criteria of the relief are met.
The Deputy asks, in particular, if I will consider increasing inheritance tax thresholds given the increase in house prices. In this regard, I would like to draw the Deputy’s attention to the Dwelling House Exemption.
This important exemption allows someone to inherit a property without paying CAT provided they meet the eligibility criteria set out in legislation. The principal criteria include that the person receiving the inheritance lived in the house for three years immediately prior to the date of the inheritance, that they do not have an interest in any other house and that the house remains their primary home for six years following the inheritance. The application of the Dwelling House Exemption will vary depending on the circumstances of each individual and further information is available on Revenue’s website.
The Deputy should be aware that there would be a significant cost in making further substantial changes to the CAT thresholds. Recent Revenue estimates put the full cost of increasing the CAT Group A threshold from its current €335,000 to €400,000, for example, at approximately €52 million.
The options available for setting CAT thresholds must be balanced against competing demands, and as part of the annual Budget and Finance Bill process.
Question No. 185 answered with Question No. 161.