Pat Cox
Ceist:164 Mr. Cox asked the Minister for Finance the cost in gross and net terms to index allowances from 6 April 1994 to 31 December 1994, and in a full year, for all capital taxes and probate tax; and if he will give a breakdown by tax.
Written Answers. - Cost of Indexing Allowances.
Following is the information requested to the extent that it is available:
Capital Gains Tax
In broad terms capital gains tax is already fully adjusted for inflation. Where the expenditure incurred on acquiring or enhancing an asset is incurred more than 12 months before the date of its disposal, the amount of that expenditure is normally adjusted to take account of inflation. The adjustment is made by multiplying the relevant item of allowable expenditure by a factor which reflects the change in the All Items Consumer Price Index during the period since the asset was acquired.
As well as indexation relief there is also a personal exemption whereby the first £1,000 of any gain is exempt from tax. The exemption is doubled for a married couple. The direct cost to the Exchequer in terms of capital gains tax foregone of introducing indexation of this relief would depend upon the indicator used and how it was applied. As an indication of the potential cost, it is estimated that a 1 per cent increase in the personal exemption is unlikely to cost more than £50,000 in a full year. On the assumption that any new indexation would affect disposals made in the 1994/95 tax year, no cost would arise in 1994 because tax on such disposals would not be generally payable until November, 1995.
Capital Acquisitions Tax
The tax-free threshold for capital acquisitions tax has also been indexed for inflation since 1990. The relevant thresholds are £150,000, £20,000 and £10,000. The threshold applicable to a beneficiary depends on the relationship of the disponer to that beneficiary. In relation to benefits taken in 1994, the thresholds are £174,400, £23,200 and £11,600, respectively.
In the case of gifts, there is an annual small gift exemption. This amount was originally £250, but was increased to £500 in 1978. The cost in a full year of indexing this exemption by reference to 1978 would be approximately £100,000.
Probate Tax
The Finance Act, 1993 already provides for the indexation of the exemption threshold. As regards persons dying in 1994, the threshold of £10,000 is increased to £10,150.
Residential Property Tax
The market value exemption limit and the income exemption limit have been indexed for inflation since 1983. The market value exemption limit has been indexed by reference to the Trends in Private New House Prices Index Number compiled by the Department of the Environment. The income exemption limit has been indexed by reference to the increase in the Consumer Price Index. The current figures are £91,000 and £28,100 respectively.