Written Answers Nos. 86-95
86. Deputy Michael McGrath asked the Minister for Finance if receipt by a beneficiary of €3,000 annually by way of a gift in line with the annual exemption from a donor, has any impact on the amount that beneficiary can receive tax free (in accordance with the relevant threshold) by way of inheritance on the death of the same donor, under gift tax legislation. [29108/16]
Amharc ar fhreagraI am advised by Revenue that there is currently an annual exemption of up to €3,000 for gifts taken by any one beneficiary from any one donor in each calendar year (section 69 Capital Acquisitions Tax Consolidation Act (CATCA) 2003). Gifts with a value that are within this limit are not taken into account in computing tax and are not included in any future aggregation of benefits taken. Where a gift exceeds this limit, only the excess over the limit is taken into account for the purposes of calculating gift tax.
In the scenario put forward by the Deputy the beneficiary could receive €3,000 annually from a donor as a gift without any charge to CAT arising and without impacting on his or her relevant CAT threshold for the purposes of calculating CAT due on any other gifts or inheritances from that same donor.
87. Deputy Michael McGrath asked the Minister for Finance the position relating to equity release loans on a person's home; if they are permitted by the Central Bank; if so, if he will provide a list of regulated entities that provide them; and if he will make a statement on the matter. [29109/16]
Amharc ar fhreagraAn "equity release loan" may include either a home reversion agreement, a lifetime mortgage or some other loan provided to a consumer borrower which is secured on the borrower's home. A home reversion agreement is one where an owner sells his/her home to a Home Reversion Firm (in return for a discounted sum or an income or both) subject to the right to continue to live in the residence until the person permanently moves out or dies. In substance, this type of agreement involves an up-front property transaction. Lifetime loans (sometimes called lifetime mortgages or reverse mortgages) on the other hand are credit agreements where a loan is provided and secured on the borrower's home, interest payments on the loan are rolled up on top of the principal amount throughout the term of the loan, the borrower retains ownership of the property and the right to continue to reside in the property and the loan is eventually repaid from the proceeds of the sale of the property after the borrower permanently moves out of the property or dies. Both of these are niche products, usually provided to people aged 60 or older.
The Central Bank has advised that, from February 2008, the Central Bank of Ireland is the body responsible for the authorisation and supervision of Home Reversion Firms. However, specific authorisation as a Home Reversion Firm is not required where the firm is the holder of another authorisation from the Central Bank in accordance with Section 29(1) of the Central Bank Act 1997. Firms authorised to provide mortgage credit in the State may provide lifetime mortgages. The Central Bank has advised that details of Home Reversion Firms currently authorised in the State and firms authorised to provide credit in the State can be accessed via the Registers section of the Central Bank's website.
The Central Bank has further advised that the Consumer Protection Code 2012 (CPC) contains a number of requirements for regulated entities regarding the provision of information to personal consumers relating to lifetime mortgages and home reversion agreements. The CPC also requires that personal consumers are made aware of the importance of seeking independent legal advice. In particular, prior to a lifetime mortgage being taken out the CPC requires that a personal consumer must be informed of:
- the circumstances in which the loan will have to be repaid
- details of the interest rate that will be charged
- an explanation of the impact of the rolling up of the interest over the duration of the loan
- an indication of the amount required to repay the loan at maturity
- the effect on the existing mortgage, if any; and
- an indication of the likely early redemption costs which would be incurred if the loan was redeemed on the third and fifth anniversary of the loan and at five yearly intervals thereafter.
Prior to a home reversion agreement being taken out, the CPC also requires that a personal consumer must be informed of:
- the circumstances in which the agreement comes to an end;
- the effect on the existing mortgage, if any; and
- in the case of a variable-share contract, an indication of the potential change in the breakdown of the ownership of the property between that held by the home reversion company and the personal consumer, over the duration of the agreement
Also, certain warning statements must be provided on advertisements, application forms, the regulated entities website and other documents related to lifetime mortgages or home reversion agreements. For lifetime mortgages, the personal consumer must be warned that while no interest is payable during the period of the mortgage, the interest is compounded on an annual basis and is payable in full in circumstances such as death, permanent vacation of or sale of the property. For home reversion agreements, personal consumers must be warned that the money they receive may be much less than the actual market value of the share in their home. For both lifetime mortgages and home reversion agreements, personal consumers must be warned that the product may negatively impact their ability to fund future needs.
In addition to the above, any other loan to a consumer borrower which is secured on residential property, such as a "top up" mortgage, will also be subject to the relevant housing loan provisions of the Consumer Credit Act, the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 and the relevant Central Bank Codes.
89. Deputy Barry Cowen asked the Minister for Finance the cost of applying a 9% special rate of VAT on the purchase of all new residential properties for use as a primary dwelling only; and the cost for applying a 9% special rate of VAT to such properties with a purchase price below €350,000 only. [29176/16]
Amharc ar fhreagraI am informed by Revenue that, while precise figures on the amount of VAT from the residential housing sector are not separately identified on VAT returns, the cost of applying a 9% special rate of VAT on the purchase of all new residential properties is tentatively estimated at €190m.
As regards the application of the 9% rate to properties with a purchase price below €350,000 only, I am advised by Revenue that the VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. The VAT Directive (Council Directive 2006/112/EC) sets the framework for the VAT rates in the EU, and provides that Member States must apply a standard rate, which in Ireland is currently 23%. The Directive also allows Member States to apply a maximum of two reduced VAT rates in limited circumstances and, in line with the Directive, Ireland currently applies to reduced rates of 13.5% and 9%. However, there is no provision in the Directive to allow for a rate of VAT to be applied in the circumstances outlined by the Deputy.
90. Deputy Jim Daly asked the Minister for Finance if a use it or lose it by year end rule is or has been in operation within his Department when devolving funding to agencies under his remit on an annual basis; and if he will make a statement on the matter. [29196/16]
Amharc ar fhreagraIn respect of the 18 bodies under the aegis of my Department only one, the Disabled Drivers Medical Board of Appeal, is in receipt of funds from the Department of Finance Vote. Funding to this Board is by way of a recoupment of costs incurred by it during the course of the year. Recoupment takes place at the end of the year, at which time the costs are known so the premise quoted by the Deputy is not relevant in this case.
The policy of my Department is to operate in accordance with public financial procedures, which require that payment is initiated when a liability has been incurred, and when payment is due (taking account of Government payment terms).
91. Deputy Joe Carey asked the Minister for Finance his views on whether a reduction in the rate of capital gains tax applying to gains on the disposal of residential lands may free up sites for development and assist in the delivery of housing units; and if he will make a statement on the matter. [29209/16]
Amharc ar fhreagraIn theory a reduction in almost any tax could lead to an increase in output in a specific sector. For a reduction in VAT could, theoretically, lead to an increase in sales of particular goods or services. These considerations must be balanced against the potential negative impacts of changing the application of or the rates of tax and the need to fund the activities of the State.
I wish to assure the Deputy that my Department continues to monitor developments in the property market. In terms of increasing housing supply, the Government's recently announced Rebuilding Ireland - Action Plan for Housing outlines its commitment to develop a fully functioning housing market that meets the needs of its citizens. This Plan takes a holistic approach in addressing the many interacting structural constraints affecting the housing market by including actions to streamline the planning system, remove infrastructure blockages and support the delivery of affordable housing. These measures should help make new developments economically viable in areas where supply constraints (and price pressures) are particularly acute.
I am not certain therefore that any change in the rate of capital gains tax on residential lands would improve the ability to provide for a fully functioning housing market.
92. Deputy Joe Carey asked the Minister for Finance the amount of capital gains tax, CGT, collected in the year following the reduction in the CGT rate to 20%; and if this represented an overall increase in CGT collected. [29210/16]
Amharc ar fhreagraI am informed that in Budget 1997, the rate of capital gains tax was cut from 40 per cent to 20 per cent (except for disposals of development land which remained taxed at 40 per cent later changed in Budget 2000).
The rate change affected four months of the 1997-1998 tax year yield and the entire yield for 1998-1999. The CGT yield the figures for these years are as follows:
1996: £83 million (€105 million)
1997: £132 million (€167 million)
1998: £193 million (€245 million)
1999: £356 million (€452 million)
The point is often made that when the CGT rate was reduced from 40% to 20% in 1998, yield increased. In fact, the yield from CGT had been increasing significantly in relative terms for some years prior to the 1998 rate change, albeit from a low base.
Several other points should also be noted in this regard. The significant rate reduction happened at a time when asset values had been rising over a period and so large gains were available to be realised. The rate drop may also have been anticipated by owners of assets such that they held off on disposal until it came into effect. More generally, while a drop in CGT rates may stimulate activity in the short term, much of the effect will come from bringing forward disposals that would have occurred anyway but at a later date. To this extent, tax yield and economic activity are not increased overall but simply moved in time.
93. Deputy Joe Carey asked the Minister for Finance if the 80% windfall tax relating to gains arising from the disposal of residential lands continues to apply; and if he will make a statement on the matter. [29211/16]
Amharc ar fhreagraI am advised by Revenue that the 80% windfall tax relating to gains attributable to a rezoning of land does not apply to disposals on or after 1 January 2015. A rezoning means a change under the Planning and Development Act 2000 from non-development land use to development land use, that is, from agricultural and amenity uses to residential, commercial or industrial uses or a mixture of such uses. The tax applied to gains on the disposal of such land in the period commencing on 30 October 2009 and ending on 31 December 2014.
94. Deputy Joe Carey asked the Minister for Finance if capital losses carried forward can be used to shelter capital gains arising on the disposal of residential development land; and if he will make a statement on the matter. [29212/16]
Amharc ar fhreagraI am advised by Revenue that, in accordance with capital gains tax legislation, allowable losses arising on disposals of other types of assets may not be set off against chargeable gains arising on disposals of development land.
However, allowable losses arising on disposals of development land may be set off against chargeable gains arising on disposals of development land. In addition, allowable losses arising on disposals of development land may also be set off against chargeable gains arising on disposals of assets that are not development land.
95. Deputy Denise Mitchell asked the Minister for Education and Skills the reason funding has not been provided to make necessary works on a new building (details supplied); and if he will make a statement on the matter. [29100/16]
Amharc ar fhreagraMy Department has not received any proposals or requests for funding from City of Dublin ETB in respect of the Centre. I understand that the ETB is exploring potential accommodation arrangements.
