I am informed by Revenue that, for the purposes of Capital Acquisitions Tax, the relationship between the person who provides the gift or inheritance (i.e. the disponer) and the person who receives the gift or inheritance (i.e. the beneficiary) determines the maximum tax-free threshold known as the "group threshold" below which gift or inheritance tax does not arise.
There are, in all, three separate group tax-free thresholds based on the relationship of the beneficiary to the disponer.
Group A: €280,000 - applies where the beneficiary is a child (including adopted child, step-child and certain foster children) or minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an inheritance of an absolute interest from a child.
Group B: €30,150 - applies where the beneficiary is a brother, sister, nephew, niece or lineal ancestor or lineal descendant of the disponer.
Group C: €15,075 - applies in all other cases.
Any prior gift or inheritance received by a beneficiary since 5 December 1991 from within the same group threshold is aggregated for the purposes of determining whether any tax is payable on the current benefit. Tax at the rate of 33% is payable on any excess received over the relevant tax-free threshold.
Ordinarily, a nephew or niece of a disponer is entitled to the Group B tax-free threshold of €30,150. However, a nephew or niece who has worked substantially on a full-time basis for a period of five years in carrying on, or assisting in the carrying on, of the trade, business or profession of the disponer, prior to the gift or inheritance is entitled to the Group A threshold for the purposes of computing the tax payable on any gift or inheritance received of the assets of that trade, business or profession. This relief is known as 'favourite nephew' relief but may apply equally to a nephew or niece.
In order for the nephew or niece to be deemed to be working substantially on a full-time basis in the business he or she must have, throughout the 5 year period, worked at least:
(a) 24 hours per week at the place where the business, trade or profession is carried on; or
(b) 15 hours per week at the place where the business, trade or profession is carried on in the case where it was carried on exclusively by the disponer, any spouse or civil partner of the disponer and the nephew or niece.
This specific relief is targeted at gifts or inheritances of business assets
in circumstances where the nephew or niece has, by their continued presence on a weekly basis, placed their labour and expertise at the disposal of the disponer thereby ensuring that material benefit is conferred on the business.
I do not have any plans currently to extend the range of circumstances in which a niece or nephew would be entitled to the Group A threshold.