115 Mr. N. Ahern asked the Minister for Finance the situation on carry over of inheritance tax thresholds; and if it is in order to carry over the unused allowance from a person's mother's estate to an aunt's estate ten years later. [16699/99]
All benefits, taken by either gift or inheritance, from any source except a spouse, are liable to capital acquisitions tax. In general, a person may receive gifts or inheritances in value up to £192,900 from his/her parents free of CAT (class I threshold). Smaller thresholds apply to gifts or inheritances received from other close relatives (class II – £25,720) and from all other categories (class III – £12,860). These thresholds are indexed annually by reference to the consumer price index. Only the value of benefits received in excess of the relevant threshold gives rise to a charge to CAT.
Where a beneficiary has taken previous gifts or inheritances from different sources since 2 December 1988, the value of these benefits must be added to the value of the current benefit when determining the current CAT liability. This process of adding, benefits together is known as aggregation. Any CAT that is referable to the previous gifts or inheritances will be taken into account, to arrive at the CAT that is due on the current benefit.
It is important to note that the £192,900 applies to the class 1 threshold. Any unused amount cannot be availed of in respect of benefits from any other category of disponer. For example, where a person receives £100,000 from a parent, and subsequently receives £20,000 from an aunt, the threshold that applies is £100,000. In other words, the "unused" part of the parent-child threshold does not apply to the £20,000 received from the aunt, and CAT on the £20,000 must be paid in full.
In this year's budget, I brought forward the date of aggregation from 2 June 1982 to 2 December 1988. Only the value of gifts or inheritances taken on or after 2 December 1988 will now be taken into account for such purposes.
116 Mr. N. Ahern asked the Minister for Finance the thresholds and rates for inheritance taxes to nieces and nephews; the advantages or otherwise of giving gifts and inheritances early; and if the tax or a portion of it can be waived or reduced by the giving of inheritances early. [16700/99]
118 Mr. N. Ahern asked the Minister for Finance when the thresholds for inheritance taxes between siblings was last adjusted; the increase which have since taken place in property values; and if he will adjust these levels in the coming budget and index link them thereafter. [16702/99]
I propose to take Questions Nos. 116 and 118 together.
There are three thresholds under capital acquisitions tax depending on the relationship between the disponer and the beneficiary. A person may receive up to £192,900 from his or her parents free of CAT. This exempt amount is described as the class I threshold. The class II threshold, currently £25,720, applies to transfers between certain other relatives, such as brother-sister, uncle-nephew and grandfather-grandchild. The class III threshold, currently £12,860 applies for transfers between people who do not fall into either of the other classes. Since 1990 these thresholds have been indexed annually by reference to the consumer price index.
The rate of CAT on inheritances is nil up to the appropriate threshold rate, 20 per cent on the next £10,000, 30 per cent on the next £30,000 and 40 per cent on the balance. In order to encourage lifetime disposals, CAT on gifts is charged at three-quarters of the rate on inheritance. However, where the disponer dies within two years of the date of the gift, the benefit is then taken as an inheritance.
In relation to inheritances between siblings, the elderly siblings relief, introduced in 1991 and which I subsequently increased in the 1998 budget takes account of the special circumstances of elderly brothers and sister who live together. The effect of this relief means that the value of an inheritance of a share or all of their family home taken from a sibling can be reduced by 80 per cent or £150,000, whichever is the lesser. Thus an individual, subject to the conditions of the relief being met, could inherit a half share in a house, with a market value of just over £257,000, before any CAT would be due.
Finally, I would like to remind the Deputy that I undertook during the 1999 Finance Bill debate to review the CAT system before the next budget. However, it is necessary to remember that changes in the CAT area are costly and that they are primarily of benefit to those in receipt of a gift or inheritance and not the general body of taxpayers.
