Dáil Éireann Debate, Thursday - 14 February 2019
20. Deputy Maureen O'Sullivan asked the Minister for Finance the way in which he plans to resolve the issues raised by unmarried persons regarding the perceived unfairness of the inheritance tax system by which there is an overarching emphasis placed on marriage and persons who are not married placed at a disadvantage. [7357/19]
Amharc ar fhreagraIt is a long-held principle of inheritance tax that transfers of property between spouses are exempt. All inheritances taken by a spouse from his or her spouse since January 1985 are exempt from tax and are not taken into account in computing tax. The spousal exemption from inheritance tax was extended to civil partners with effect from 1 January 2011.
As a result of the full tax exemption that applies, spouses and civil partners are not included in any of the tax-free Group thresholds and inheritances between spouses and civil partners are not counted for the purposes of aggregating lifetime inheritances. There are three separate Group thresholds based on the relationship of the beneficiary to the disponer. The Group A threshold (currently €320,000) applies, inter alia, 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. The Group B threshold (currently €32,500) applies where the beneficiary is a brother, sister, a nephew, a niece or lineal ancestor or lineal descendant of the disponer. The Group C threshold (currently €16,250) applies in all other cases.
Any prior 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 a benefit. Where a person receives inheritances that are in excess of their relevant tax-free threshold, CAT at a rate of 33% applies on the excess over the tax-free threshold.
While single individuals may not bequeath property free of inheritance tax under the spouse or civil partner exemption, they may bequeath property or assets to individuals free from inheritance tax provided the value of the property or assets does not exceed the relevant tax-free Group thresholds when previous bequests to the individual are taken into account.
In addition, single individuals can avail of the ‘dwelling house exemption’ to bequeath their principal private residence, generally the most substantial asset owned by an individual, free from inheritance tax which allows for property to be inherited tax-free irrespective of its value where the beneficiary is already living in the house subject to certain conditions.
Agricultural property and relevant business property of a single individual can also be bequeathed with a significant 90% reduction in their taxable values under the Agricultural Relief and Business Relief schemes where the relevant conditions are met.
To the extent that there are differences in the tax treatment of the different categories of couples, across relevant tax heads including inheritance tax, such differences arise from the objective of dealing with different types of circumstances while at the same time respecting the constitutional requirement to protect the institution of marriage. Therefore any change in the tax treatment of cohabiting couples in respect of inheritance as with other taxes could only be addressed in the broader context of future social and legal policy development in relation to such couples.
