Amendment No. 90 is in the name of Deputy Michael McDowell.
SECTION 111.
Chairman
May I move it on behalf of Deputy McDowell?
Chairman
Yes.
I move amendment No. 90:
In page 111, subsection (1), to delete lines 15 to 17 and substitute the following:
"‘(2) In this section "qualifying expenses" means expenses in relation to medical care, maintenance and the provision of accommodation for the incapacitated individual.'.".
I gather there has been some dialogue with the Deputy on this matter. Section 111 of the Bill gives a full CAT exemption in respect of gifts or inheritances taken for the purposes of paying for the medical care, including related maintenance costs, of a person who is permanently incapacitated. Incapacity in this context means the physical or mental infirmity which is permanent in nature. The individual involved does not have to be totally incapacitated — that is, requiring more or less round the clock care — as is required for some of the income tax reliefs. There is a difference: for example, a person unfortunate enough to be confined to a wheelchair may by permanently incapacitated but may not necessarily be totally incapacitated.
The link with permanent incapacity is related in a way to the changes in the covenant relief which I made last year. Deputies may recall that I made an exception for covenants in favour of a person who is permanently incapacitated. Such covenants still qualify for unrestricted relief, so it is still possible to "subsidise" for example, nursing home fees for an incapacitated parent through the tax system by means of a covenant. However, it was pointed out to me that such covenants could in fact give rise to a gift tax liability in the hands of the recipient and this is what prompted me to bring forward the present exemption in section 111 of the Bill. The linkage with medical care also seemed logical and consistent with the income tax code since medical expenses are generally allowable as an expense for income tax purposes.
Deputy McDowell's proposed amendment moves away from the concept of the gift or inheritance being used to fund medical care, and related maintenance, as the qualifying condition for exemption. It would effectively exempt from CAT all gifts or inheritances given for the purposes of providing "maintenance" and "the provision of accommodation" for an incapacitated person, although such accommodation or maintenance may or may not be related to any medical care.
On the face of it this appears to be reasonable enough, particularly when one thinks of a situation where an incapacitated person may be dependent on others for the provision of a home, apart altogether from the question of medical expenses, and the value of the benefit provided together with the relationship to the benefactor may be such as to bring the benefit within the scope of CAT.
However, Deputy McDowell's amendment is framed in exceptionally broad terms. In theory, at least, it would effectively allow for the transfer of almost unlimited wealth, free of CAT, to an incapacitated person, as there are no conditions or limits suggested as to the appropriate amount to be provided for "maintenance" or "the provision of accommodation". The incapacitated person may possibly be a very wealthy person in his or her own right; the accommodation in question may be worth a great deal and may be unrelated in any way to the particular incapacity; and the moneys provided for "maintenance" may well be regarded as excessive by normal standards.
I have a great deal of sympathy with what the Deputy is trying to achieve and I accept there can be situations where gifts or inheritances taken by incapacitated individuals should not be liable to CAT. Unfortunately, it is not at all easy to legislate for individual hard cases without increasing the scope for unintended results. In particular, I feel that any relief in this area, if it is to be broadened beyond medical care and related maintenance, should be linked at least in some way with ability to pay. However, I am not quite sure at this stage as to how this could best be achieved and I would like some time for my officials to look at this more carefully.
I am also concerned about keeping some degree of consistency in the tax code. There is no provision in the income tax code enabling an incapacitated person to claim a deduction against income for the cost of accommodation — for example, rent, or maintenance which is unrelated to medical care.
I should point out that the Revenue Commissioners have, under "section 44" of the CAT legislation, specific powers to deal with hardship cases or cases involving "complication of circumstances". I understand from the commissioners that the Deputy's amendment may in fact be based on the circumstances of a particular case, an outline of which has been recently sent to the capital taxes division. The commissioners tell me that, based on that outline of the facts, they will be prepared to consider applying the "section 44" provisions in that case; and I understand that the commissioners will be in touch with the agent very shortly to take the matter further. So, perhaps something can be done administratively in that particular case. I certainly hope so. In the meantime I must oppose this amendment.
Amendment, by leave, withdrawn.
Section 111 agreed to.
Section 112 agreed to.