What is this section?
SECTION 102.
Question proposed: "That section 102 stand part of the Bill."
This is a technical amendment required to ensure the term "general exemption limit" in section 110A of the Finance Act, 1983, has the same meaning as in section 100 of that Act. Section 110A sets out the residential property tax.
I am always wary of a retrospective statement in law. Does it change matters for the taxpayer or the Revenue Commissioners?
There is no additional tax liability for property owners. It is just a clarification.
Question put and agreed to.
SECTION 103.
Question proposed: "That section 103 stand part of the Bill".
People are writing to me about inheritance tax. Elderly people who live with their niece, for example, might have an arrangement that she will inherit the house. In the last three years, the value of houses has increased dramatically, so the arrangement for the transfer of a modest house has suddenly become one where the niece will be flung into a financial crisis when the aunt dies. There should be some relief for long-term cohabiting relatives from the consequence of house price inflation if there is some understanding or arrangement that the house will transfer from one to the other. I have been told the way around this is an insurance policy but the value of that policy would have to increase dramatically to keep pace with rising house prices.
I am familiar with the problem where people in the situation the Deputy described find themselves with substantial residual capital gains tax bills. In those circumstances, there is an existing practice where the Revenue Commissioners have the discretion to take into account excessive hardship. They can consider proposals for postponement of payment or phased payment over a period of time, including the waiver of interest. I would have to examine whether it could be indexed in the manner the Deputy suggested.
There is no problem if I have a rich aunt who leaves me a house in Shrewsbury Road which has doubled in value. There would also be none if she left me a stamp which trebled in valued. However, if I am a cohabiting relative and have been there for donkey's years, I will be hammered because of a sudden upward movement in market prices.
I received a letter which highlighted an anomaly regarding single brothers and sisters. It stated that a number of single brothers and sisters in the area came together with a view to lobbying all parties on the inheritance tax. They claim the tax on the transfer of a house on the death of a brother or sister should be the same between single brothers and sisters as between married couples and their children. They are all over 55 years of age and the request is made as a matter of principle. As far as they are concerned, this Government has favoured married, cohabiting and separated couples and unmarried mothers and their children, with no thought for legitimate single brothers and sisters who cared for their aged parents without State aid until they died. They say it is a sin to be single and their only use, as far as politicians are concerned, is for paying taxes. There are many single brothers and sisters living under the same roof whom they intend to contact before the coming general election. That is the thrust of a letter sent to my party leader who sent it to me. It is something which should be considered because there must be many similar cases around the country.
There are. I recall on a number of occasions moving amendments on matters not dissimilar to what the Deputy has referred to, although we are not formally at his amendment as of yet. Applying the same logic to couples or people who live together as family, whether in a sexual or sibling relationship, who are effectively sharing the cost of accommodation with an expectation the survivor will inherit the property, as between husband and wife, is something we should examine again and return to on Report Stage. One cannot be treated without treating the other.
The framework I envisage would be to establish the concept of a common home, so that, where a property is a home for two people, it would be treated differently from an investment property for capital acquisitions tax purposes.
While I want the Minister to go down this route, if he seeks observations from other Departments, the Department of Social Welfare, for example, will ask him how household income will be divided and what constitutes a household. This is a complex area which also has social welfare implications. I do not wish to put blocks in the Minister's way but it is not as easy as it looks. It could be done for taxation purposes but questions will then arise in other areas as to what constitutes a household. Reports have been carried out on this but it has serious financial implications for the State. The proposal would cause the State little financial hardship as it would not lose much money.
The relationship between brother and sister, between a married couple and between niece and aunt must be established so as to be clearly and objectively verifiable. There would have to be a duration of time for cohabiting couples.
Even for a stranger who is caring for an elderly person?
Yes. There would be a time test. For example, there has been a succession of tenancy cases involving an aunt and niece. One of the parties has to be living in the property for two years, be a registered subtenant and the differential rent has to reflect the earnings of the young person plus the elderly person's pension. That is the case with Dublin Corporation. I do not know if it applies to other local authorities.
There have been cases where someone in poor health has Mary or Johnny move in with them and then claim they had been living there for a long time. There are procedures for establishing the veracity of such claims, such as the electoral register. I have no problem with the principle. It must be addressed. However, the definition and complexity may require more time than we have available between now and Report Stage.
From the Exchequer's point of view, if that lady in Clontarf dies and her niece has to raise £60,000, the niece will be forced to sell the property. She would hand over stamp duty to the Minister but would be knocking on Dublin Corporation's door soon afterwards.
There is a threshold, five years and £60,000 reduction between brother and sister. However, what if a niece or nephew has been living with an aunt for many years, looking after the house and putting their own money into it? In the farming community one has the favourite nephew who is like a son. Could this be looked at?
As a matter of definition?
Yes.
The farming nephew might be working the land. The residential nephew may be paying for the operating costs of the property so he is making a financial and economic contribution. We will look at this matter.
Question put and agreed to.
Section 104 agreed to.
NEW SECTION.
I move amendment No. 105:
In page 86, before section 105, to insert the following new section:
"105.—For the purposes of assessment of liability to Inheritance Tax only, a person inheriting from a brother or sister with whom he had resided since the death of their last surviving parent shall be entitled to the same exemption threshold enjoyed by a spouse inheriting from a spouse.".
I will resubmit this amendment on Report Stage.
Amendment, by leave, withdrawn.
Section 105 agreed to.