Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

It gives more flexibility to persons to order their affairs. I will read the full note.

There are two important dates that are relevant for the taxation of an inheritance. These dates are used for different purposes. First, the date of death of a disponer is the date by reference to which the group tax-free thresholds and tax rates are determined. Therefore, whatever thresholds and rates are in force on this date apply for the purpose of taxing the value of an inheritance. These rules are based on statute and are strictly applied.

Second, the date on which probate or administration is granted is generally used as the "valuation" date. The valuation date is the date on which the market value of the assets or property comprising the inheritance is established. This market value is then compared to the relevant group threshold and the tax rate applied as appropriate on any excess of the market value over the threshold. This date also determines when any inheritance tax must be paid and a tax return must be submitted to Revenue. However, as stated, the thresholds and rates in force at the date of death of the disponer apply for the purpose of taxing the value of the inheritance.

Also, for capital gains tax, CGT, purposes, where a person acquires assets as a legatee of a deceased person, that person is treated as acquiring those assets at the date of death of the deceased person.

It is a general legislative principle that tax legislation should follow general law. According to the law of inheritance an inheritor comes to own an inherited asset on the date of inheritance, rather than on any other date. This is therefore the soundest and most appropriate date for the rules relating to the rates and thresholds relating to capital acquisitions tax, CAT, which are necessarily specific and precise to apply.

The amount of time elapsing between inheritance and grant of probate can vary greatly, and can also be determined to a large extent by inheritors themselves. As such, were the rate of tax due and the tax-free threshold available to be defined by date of probate there would be considerable scope for individuals to delay probate with the hope that the CAT regime would become more favourable for them.

While I understand that there are inheritors for whom it would currently be advantageous for the tax-free threshold and rate of tax to apply according to the date of probate, as the threshold for inheritances from parents has been increased, there have been and could again be situations where the opposite is the case, for instance, when the thresholds have been reduced or the rate increased.

To apply CAT rules with respect to the date of probate would also be in conflict with the CGT provisions that treat the date of death of a deceased person as the acquisition date by a legatee for the purposes of that tax.