Richard Bruton (Dublin North Central, Fine Gael)
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Question 228: To ask the Minister for Finance if he will consider increasing the threshold for the transfer of property to a niece or nephew under the capital acquisitions tax code, or relaxing the conditions under which a niece or nephew can obtain favoured status under the terms of that tax, in order to encourage mutual support within the extended family; and if he will make a statement on the matter. [16693/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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For the purpose of gift and inheritance tax, the relationship between the person who provided the gift or inheritance, the disponer, and the person who received the gift or inheritance, the beneficiary, determines the maximum tax free threshold, known as the group threshold. Three such thresholds exist, which are indexed by reference to the consumer price index. The indexed group thresholds for 2003, 2004 and 2005 are set out in the table below.

The current threshold for gifts-inheritances made to a niece or nephew of the disponer is €46,673, and where the value of the gift or inheritance is greater than this, a single of rate of 20% applies to the excess. Favourite niece-nephew relief is available to certain nephews and nieces who take a gift or an inheritance of a business or farm from the disponer. If the niece-nephew qualifies for the relief, he or she is treated as a child of the disponer for CAT purposes, and instead of a group B threshold, currently €46,673, is entitled to a group A threshold, currently €466,725, for the business or farm assets only. This means that if a gift or inheritance includes business-farm and non-business/farm assets the group B threshold will apply to the non-business/farm assets and the group A threshold will apply to the business-farm assets.

In order to qualify for the relief, the applicant must be a child of a brother or sister of the disponer, so that a nephew-niece in law will not qualify. He-she must also have worked substantially on a full-time basis for the disponer for a minimum of five years ending on the date of the gift or inheritance. This relief is intended to take account of the close working relationship that exists between certain nieces-nephews and their uncles-aunts. It is not intended to apply generally to all gifts or inheritances taken by nieces-nephews, and applying the relief to all such disposals would run counter to the Government's policy of broadening the tax base in order to keep direct tax rates low.