Michael McDowell (Independent) | Oireachtas source

I thank the Minister for coming to the House and the Chair for listing this Commencement matter. According to the tax and duty manual, under the capital acquisitions tax part 15 on insurance policies and in particular under sections 72 and 73 of the Capital Acquisitions Tax Consolidation Act, it is possible to put in place an insurance policy, the purpose of which is to meet the anticipated capital acquisitions tax which will occur on the death of any individual.The proceeds of the insurance policy do not effectively add to the size of the estate for the purpose of capital acquisitions tax and they are available to the personal representative of the deceased to discharge the CAT liability, usually inheritance tax, for relatives who the property owner wishes to protect. That is fine and it works reasonably well except that it can be expensive on some occasions. The strange thing about the insurance policy is that the wealthier the person providing the insurance is, the less of a burden it is to that person to avail of the policy. For example, somebody might want to provide for the likely CAT, which will occur if he or she dies and has to leave his or her home to a child or whatever. The issue is that one of the prerequisites for qualifying under sections 72 and 73 is that the person who takes out the insurance policy effectively has to pay the premiums himself or herself.

This issue has not been raised by wealthy people but it has been presented to me by a broker who operates in the Cork area that he sees injustices, namely that less well-off people who are not in a position to fund the premiums find themselves at a disadvantage compared with people who are better off in a similar situation. He tells me this would be remedied by allowing the likely inheritor to participate in the insurance policy. This could be done by noting his or her interest on the policy; making him or her a contributor to the policy; or exempting any assistance her or she gives to his or her parents to pay for the insurance from CAT, gift tax, income tax or whatever. His view is that as between people in relatively similar situations, the present requirement that the disponer under an inheritance should pay the insurance policy premia effectively discriminates unfairly against those with lesser means as opposed to those with greater means.

I ask the Minister of State to examine this issue and consider some means whereby the person for whose benefit the insurance policy is put in place could contribute to the extra expense imposed on the person who has to be the policyholder.