Robert Troy (Longford-Westmeath, Fianna Fail)

I thank the Senator for raising this matter. I have also been contacted by the family in question. To their credit, they have been very strong in their advocacy and other work they are doing contacting all Members of the Dáil and Seanad. I am taking this matter on behalf of the Minister, Deputy Paschal Donohoe, who is out of the country.

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 a gift or inheritance as opposed to the person providing that gift or inheritance. Capital acquisition tax plays an important role in ensuring we maintain a broad tax base and raised €854 million in 2024. The Senator will agree that the latter is a not an insignificant sum of money. It also ensures that transfers of wealth within families and between generations are appropriately taxed.

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, currently €400,000, applies where the beneficiary is a child of the disponer.The group B threshold, 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, 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 acquisition 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 with the argument being made that beneficiaries such as nephews and nieces of disponers who are single or childless - I take the point the Senator made about using the word "childless" - should benefit under the group A threshold. It is important to be aware that Ireland is not unique in providing a distinction in 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. To qualify for the exemption, the inherited property must have been the disponer’s principal private residence at the date of 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. 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. A number of other exemptions and reliefs are available, including the small gift exemption and agricultural and business relief.

The Senator should note that the existing CAT regime, as with all legislation, was created with the benefit of advice from the Attorney General. Therefore, the Minister for Finance is satisfied that the regime does not conflict with the Equal Status Acts 2000 to 2008 and is not unconstitutional.