Vol. 512 No. 1
157 Mr. N. Ahern asked the Minister for Finance the cost to the Exchequer if the PAYE £1,000 tax allowance was given to all children under 18 years of age; if it could be claimed by parents for tax purposes; and the circumstances which parents can covenant money to one of their own children. [25673/99]
I assume what the Deputy has in mind in the first part of the question is the introduction of a child tax allowance of £1,000 per child so as to reduce the tax bills of parents.
The Revenue Commissioners have informed me that if such an allowance was introduced and was confined to the children of PAYE taxpayers the cost to the Exchequer would be approximately £220 million in a full year if allowed at the marginal rate of tax. The corresponding cost would be £153 million if relief was confined to the standard rate of 24 per cent.
If this allowance was extended to all taxpayers, the corresponding cost would be £271 million at the marginal rate of tax and £191 million at the standard rate.
As regards the question of covenants by parents to their children who are under 18 years of age, there is no tax relief available on such covenants. This was the general position even before the tax relief on covenants was restricted in 1995 in the context of the introduction of free fees for third level publicly funded colleges.
Tax relief on covenants between individuals is only available in the following circumstances: covenants to adults aged over 65 subject to a limit of 5% of the coventantor's total income; unrestricted tax relief can be claimed on covenants to permanently incapacitated persons. However, no relief is available on covenants from parents to their own minor incapacitated children; and unrestricted tax relief can be claimed on covenants which are part of a maintenance agreement between separated spouses.
I have no plans to change the current arrangements.
