Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

As the Senators will be aware, the small gift exemption is an annual capital acquisitions tax, CAT, relief available to all recipients of gifts. This means a person can receive a gift to the value of €3,000 free of CAT. For example, a parent may give a gift up to the value of €3,000 to a child or, indeed, anyone else, each calendar year without any CAT arising. Two parents can make gifts of €3,000 each to a child, resulting in a gift to the value of €6,000 in any year free of CAT. It should be noted that there is no limit on the number of small gifts a person can receive in a year from different donors.

According to Revenue, the estimated cost of increasing the small gift exemption to €5,000 is €1.3 million. However, it is important to note that there is no requirement for beneficiaries to submit a claim for the small gifts exemption to Revenue. As a consequence, there is no data available regarding the number of beneficiaries availing of this exemption each year and it is likely that this figure represents a significant underestimation of the actual cost of such an increase.

The Senators will be aware that there would be a significant cost in making further changes to the small gift exemption for CAT purposes. An increase in the small gift exemption must be balanced against competing demands on the Exchequer.

A wide variety of further exemptions and reliefs from CAT, and capital taxes more generally, are also available. In particular, for a gift from a parent to a child, CAT is only paid on the value of cumulative gifts above a lifetime tax-free threshold of €335,000. In other circumstances, including where gifts or inheritances are given by a grandparent to a grandchild, or gifts between siblings, CAT is only paid on the value of the gifts or inheritances above a lifetime threshold of €32,500. A tax-free threshold of €16,250 applies for instances of gifts or inheritances between individuals with relationships not covered by the other thresholds.My Department publishes tax strategy group papers, including matters for consideration as part of the annual budget and Finance Bill process each year. Capital acquisitions tax and the small gift exemption were considered as part of this year’s tax strategy group process. I do not propose a further report at this time.