Pat Buckley (Cork East, Sinn Fein)
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I congratulate the Minister of State. They say love is blind and marriage is an eye-opener.

We in Sinn Féin believe in a tax system that is fair. As part of this, inheritance tax is an important tool to tackle inequality and invest in public services to deliver a fair society. However, the current system is highly discriminatory towards beneficiaries of estates left by people with no children.

The capital acquisitions tax, CAT, regime applies a rate of 33% on gifts or inheritances above a certain tax-free threshold that depends on the beneficiary’s relationship to the person who gives them the gift or inheritance. For spouses and civil partners, inheritances are tax-free. Children inheriting from a parent can receive up to €400,000 tax-free. For other relatives, a tax-free threshold of €40,000 applies, while non-relatives can receive up to €20,000 tax-free.

The threshold that applies to the beneficiaries of an estate of childless adults is, quite simply, discriminatory and extremely unfair to all of Ireland's 1 million childless citizens. Among them are a significant number of LGBTQ+ folk, who face added barriers when it comes to growing a family or who simply do not wish to have children. Thankfully, Irish society has changed greatly in recent decades, and more and more people now live in situations where the traditional family model does not apply.

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Lately, I have been contacted by several constituents who do not have children and this issue is of real concern for them. One woman has spoken to me and said she has no children of her own but her younger cousin lives with her and acts as her carer. She intends to leave the house to her cousin. However, if she does, she fears her cousin will have to sell the house in order to cover the capital acquisitions tax bill. I am not advocating for anything to be taken away from parents and their children. Instead, we are simply advocating for equality and an end to the discrimination faced by all childless citizens. It is not fair or equitable that a nephew inheriting a home valued at €400,000 from a childless uncle will have to pay a tax bill of €118,800 while a child inheriting a €400,000 home from a parent will have to pay a tax bill of €0. For example, the Taoiseach can pass assets of up to €1.2 million to his three children tax free while the childless assistant can only pass assets worth €120,000 - ten times less - tax free to nieces and nephews.

The Government now knows very well the profound financial impact the current discriminatory rules will have on childless citizens and their loved ones. Their loved ones will be faced with additional punitive taxes, running into tens of thousands and, in many cases, hundreds of thousands of euro solely because of their childless status. For so many elderly childless constituents, time may sadly not be on their side. I will continue to call for an overhaul of the inheritance tax system, as the current rules are so blatantly inequitable and discriminatory. They are unfit for purpose, given the varied family structures that operate in Ireland today. Budgetary matters can never be allowed to supersede equality matters for childless citizens. Whatever economic challenges may lie ahead in this country, the burden of inheritance tax must be urgently reformed for the betterment of all our citizens.

I have dealt with a lot of elderly people who do not understand what capital acquisitions tax is. There is a fear out there, especially in the current climate where houses are so scarce. Family members are actually terrified and do not know whether they can will their properties back to their kids, cousins or whoever and what will happen. Will there be an initial financial burden, which there is? That is why I wanted to flag it here tonight in the hope the Minister of State will be able to give me an answer for those constituents to whom I have been talking.

Emer Higgins (Dublin Mid West, Fine Gael)
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I thank the Deputy for raising this matter in the House today. As he is aware, capital acquisitions tax is a tax on inheritances or gifts on an amount over a particular tax-free threshold. It is a beneficiary-orientated tax, which means it is payable by the recipient of the gift or inheritance as opposed to the person providing that gift or inheritance. Capital acquisitions tax, CAT, plays an important role in ensuring we maintain a broad tax base and it raised €854 million last year. For CAT purposes, the relationship between the person giving a gift or inheritance, the disponer, and the person who receives it, the beneficiary, determines the maximum amount, known as the group threshold, below which CAT does not arise. The Finance Act 2024 increased each threshold and the estimated cost was €88 million annually.

The group A threshold, which is currently €400,000, applies where the beneficiary is a child of the disponer. For clarity, it is useful to note that the definition of children for CAT purposes includes any stepchildren, adopted children or certain foster children. Any of those can avail of the group A threshold in respect of gifts or inheritances received from that disponer. The group B threshold, which is currently €40,000, applies where the beneficiary is a brother, sister, nephew, niece or lineal ancestor or lineal descendant, such as a grandchild, of the disponer. The group C threshold, which is currently €20,000, applies in all other cases. Where a person receives gifts or inheritances that are in excess of the relevant tax-free threshold, capital acquisitions tax at a rate of 33% applies on the excess benefit.

In the past year, there has been a focus brought to the group B threshold and access by disponers who are single or childless to their beneficiaries benefiting from the group A threshold. Ireland is not unique in providing a distinction in relation to how children are treated for inheritance tax purposes compared with nephews, nieces and siblings. There are a number of exemptions and reliefs from this tax that may apply, depending on the circumstances of the case, some of which do not require that any specific family relationship applies. One such exemption is the dwelling house exemption. Where a person takes an inheritance of a dwelling house, that person may be able to avail of the dwelling house exemption. I know the Deputy cited that in one of the examples from one of his constituents. To quality for the exemption, the inherited property must have been the disponer’s principal private residence at the date of his or her death. The beneficiary must also have lived in the house for three years prior to the date of the inheritance and must continue to live in the house for six years after that date. In addition, the beneficiary must not have a beneficial interest in any other residential property. Detailed guidance on the dwelling house exemption is published on the Revenue website.

In addition, nieces or nephews of that disponer may qualify for favourite niece or favourite nephew relief in respect of gifts or inheritances of business assets. The relief allows a niece or nephew who qualifies for the relief to avail of the group A threshold. 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 in carrying on, or assisting in the carrying on, of a trade, business or profession. A number of other exemptions and reliefs are available, including the small gift exemption and agricultural and business relief.

In conclusion, I note that the existing CAT regime, as with all legislation, was created with the benefit of advice from the Attorney General. As a result of this, all legislation in this situation enjoys the presumption of constitutionality unless the courts find otherwise. The Minister assures me that he is not of the view that the current CAT regime is unconstitutional.

Pat Buckley (Cork East, Sinn Fein)
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I thank the Minister of State for a pretty in-depth response. Sometimes, it can be fairly flippy-floppy here. I welcome her response. I have had a case where a beneficiary was living for more than three years in a house but did not know what the actual rules were and was panicking because that person did not know whether to buy it.

Since there has been a proper response, I will delve into it more myself. I understand what the Minister of State said about the Attorney General and what he said but it is nice to have it discussed. I welcome the information on the bands and group thresholds. It has actually opened my eyes. I probably should have read it from A to B. I am desperate, as I normally read something three times - three times, all the time.

I welcome the response to this and I thank the Minister of State for it. I will certainly take it back to my constituents. Maybe they could read it a bit more than I could at this time.

Emer Higgins (Dublin Mid West, Fine Gael)
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I thank the Deputy for his constructive engagement on this. I really hope the information that has been provided on the record of the Dáil tonight is of use to his constituents and many other of our constituents, too. Just to clarify and confirm, the Minister for Finance and his Department are satisfied to the constitutionality of the existing CAT legislation. This matter was considered earlier this year by the tax strategy group. It noted in its capital taxes paper that Ireland was not unique in providing a distinction as to how children were treated for inheritance tax purposes compared with nieces, nephews and siblings. There has been a long-standing differentiation between direct familial relationships and more distant relationships maintained in the Irish legal system since the foundation of the State. That is reflected in the Constitution, Article 41 in particular.

It is important to be aware that any changes to the CAT regime would be considered in the context of various competing demands on the public finances and budget 2026 but we will take on board some of what the Deputy said in his initial contribution. I really hope that the information provided here is of use to him, his office and his constituents.