Brian Cowen (Laois-Offaly, Fianna Fail)

The Deputy refers to two separate circumstances of potential abuse of the tax system. The first relates to section 86 of the Capital Acquisitions Tax Consolidation Act 2003, known as the family home relief, which provides an exemption in regard to second dwellings.

With regard to section 86 of the Capital Acquisitions Tax Consolidation Act 2003, the purpose of this exemption is to benefit individuals who had been living in their own family home for a period prior to acquiring the house, either by way of gift or inheritance. The provision came into effect for gifts or inheritances taken on or after 1 December 1999. The main conditions attaching to the exemption are that the beneficiary, that is, the person who receives the gift or inheritance of the dwelling house, must have resided in the house for a minimum of three years prior to the gift or inheritance and must not have had an interest in any other dwelling house. In addition, the beneficiary must continue to occupy that dwelling house as his or her only or main residence for a period of six years commencing on the date of the gift or inheritance. This lengthy owner-occupier condition was included in the legislation to restrict the relief to genuine cases and avoid the relief being used as a means of tax avoidance. These conditions of ownership and residence after acquisition may be waived where the beneficiary requires long-term medical care in a hospital, nursing home or convalescent home or where the beneficiary is aged 55 or over.

I am informed by the Revenue Commissioners that statistics are available on the number of claims under section 86 since the introduction of the relief. The number of claims was three in 2000, 24 in 2001, 13 in 2002, 252 in 2003, 553 in 2004 and 542 in 2005. This compares to almost 20,000 capital acquisitions tax returns in 2005, or just under 3% in that year.

The relief was introduced in the 2000 budget to help those sharing the family home who were faced with very large tax bills when inheriting the home they had lived in for some time. The relief was particularly addressed at cohabiting couples not catered for in the law before then, aunt and niece type cases and same sex couples. It was widely welcomed when it was introduced and applies irrespective of the value of the dwelling house being transferred.

I have no evidence that this provision is being abused. The fact that the numbers using the relief have increased sharply since it was introduced is not evidence of abuse in itself. The number of persons claiming relief under section 86 made up less than 3% of the overall number of claims under capital acquisitions tax in 2005. If the Deputy has evidence to support her concerns of abuse she should being it to the attention of the Department or the Revenue Commissioners.

The second matter raised by the Deputy refers to the avoidance of stamp duty liability and capital taxation charges by developers using licence arrangements. Stamp duty is a charge on documents, which are mostly legal, used in the transfer of property. Where a property is purchased, stamp duty is charged on the conveyance or transfer effecting change of legal ownership of the property concerned. If there is no conveyance, there is no stamp duty. A builder or developer can, therefore, obtain a licence from a vendor to build on land owned by the vendor without incurring a stamp duty charge at that stage of the venture. Once the buildings, whether commercial or residential, are completed the conveyances or transfers of such properties to purchases are liable to stamp duty in the normal manner unless specific exemptions are available to such purchasers.

Taking account of the proliferation of developments generally in recent times and in the context of its major project in the construction sector in 2006, the use of licensing and similar arrangements is being reviewed by the Revenue Commissioners as part of its audit and compliance programmes. The review, as with Revenue's overall approach to business, will focus on risk. I have asked Revenue to inform me of the outcome of its review and I will decide what action, if any, is required, bearing in mind the effect on the housing market and the cost to the Exchequer.

Information requested by the Deputy on the number of land transfer and development schemes involved is not available.

The Deputy is concerned that the use of licence arrangements by developers might constitute avoidance of capital taxation on the part of the developer but the Revenue Commissioners have informed me that as capital sums payable to landowners for the disposal of property by way of licence agreements are chargeable to capital gains tax in the normal manner, it is not considered that such tax is avoided by the use of these arrangements.

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