Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

I thank the Deputy for raising this important issue. We believe it is appropriate to apply inheritance tax on transfers of wealth between generations. If people are taxed on earned income, it is only fair that people should also be taxed if they inherit income. It has always been recognised, however, that where the beneficiary is a child, including certain foster children, there should be a generous threshold before inheritance tax kicks in. These are called group A inheritors and the threshold is currently €335,000. A child can inherit up to €335,000 from a parent without having to pay any inheritance tax at all. It only kicks in on the amount above that.

However, the view has always been taken that where the beneficiary is a brother, sister, niece, nephew, lineal ancestor or lineal descendant of the disponer, a much lower threshold should apply due to the greater distance in relationship. This explains the current group B to which the Deputy referred, where the threshold is €32,500. It should be noted that in certain situations nieces or nephews may qualify for a favourite niece of favourite nephew release in respect of gifts or inheritances. In those situations, they are treated as though they were a son or daughter. Qualifying nieces or nephews are those who have worked substantially on a full-time basis for a period of five years prior to the gift or inheritance being given carrying on or assisting in the carrying on of a trade, business or profession of the disponer. For the nephew or niece to be deemed to be working substantially on a full-time basis in the business, he or she must work more than 24 hours per week at the place where the business, trade or profession is carried out or more than 15 hours per week where the business, trade or profession is carried out exclusively by the disponer, any spouse or civil partner of the disponer or the nephew or niece. That is the current situation whereby a nephew or niece could qualify as though they were a son or daughter.

The point the Deputy made is correct. I think that probably is too narrow. We should examine ways of broadening it. An example that occurred to me is a situation in which a favourite niece or nephew is acting as a carer and has been looking after an aunt or uncle in the last couple of years of his or her life. That is not counted. It counts if a niece or nephew worked in a business but it does not if the same niece or nephew was caring for an aunt or uncle, full time or part time, in the last couple of years of his or her life. In that case, the favourite niece or nephew status does not apply. There may be a number of such examples on which the Deputy and I could work together. We could change those rules. I do not think it would be right to change them wholesale and to treat every niece and nephew as if they were the same as a son or daughter but where there are particular cases like that, we could broaden the criteria. My office and that of the Minister for Finance would be happy to take that issue further with the Deputy.

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