Róisín Shortall
Ceist:134 Ms Shortall asked the Minister for Finance the implications of inheritance tax for a co-habiting couple who jointly own their family home; and if he will make a statement on the matter. [25799/01]
Written Answers. - Inheritance Tax.
In Budget 2000, I made substantial changes to the capital acquisitions tax, CAT, legislation which apply to gifts and inheritances taken on or after 1 December 1999. The measures included the introduction of a "dwelling house" relief which provides that the transfer of a home will be exempt from CAT subject to the following conditions; that the home is the principal private residence of the recipient and the recipient has been living in the home for the three years prior to the transfer. Where the house has replaced other property, this condition may be satisfied where the recipient has continuously occupied both properties as his or her only or main residence for a total period of three out of the four years immediately prior to the transfer. The recipient must not have an interest in any other residential property. The recipient must own and reside in the house for six years after the transfer. The relief will be withdrawn where the recipient sells or otherwise disposes of the house within the six years. However, where the recipient sells the home within the six years and invests some or all of the proceeds in a replacement home and continuously occupies both homes for a total period of six out of the seven years commencing on the date of the transfer, the clawback will be limited to any proceeds not reinvested in the replacement home. This six year condition will not apply to recipients over 55 years of age and provision will also be made for those circumstances where the recipient is unable to comply with the residence requirement for reasons outside their control, that is, due to hospitalisation or work obligations.
Once all of the above conditions are met, there will be no CAT liability on the transfer of a home regardless of the nature of the relationship between the disponer and the recipient. This relief is available in addition to the Group III exemption threshold of £15,840 which applies to gifts and inheritances between non-relatives. Where an individual has received previous gifts or inheritances since 2 December 1988, from a Group III source, the value of these benefits must be taken into account for the purposes of determining the current, if any, liability to tax.
I am confident that this particular measure should remove the CAT burden on the gift or inheritance of the home for many people, including those in family and personal relationships who are otherwise treated as strangers under the CAT law. Finally, the significant package of measures contained in Budget 2000 constitutes the biggest single easement in the structure of CAT since its introduction in 1976. I consider that the "dwelling house relief" when taken in conjunction with the other measures introduced, in particular the single 20% rate, will reduce the CAT liability for all beneficiaries. I replaced the old higher rates of 30% and 40% with the single rate as I considered that the previous rates would have imposed a considerable burden in circumstances where the thresholds are exceeded by relatively modest amounts.