Written answers

Wednesday, 14 June 2006

9:00 pm

Photo of John CreganJohn Cregan (Limerick West, Fianna Fail)
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Question 134: To ask the Minister for Finance the present categories and thresholds for inheritance tax; when they were last adjusted; if they are adjusted annually for inflation increases; if the general inflation figure or that for property is used; if a person without children can nominate someone else for example a niece to receive the first category relief in a case where the niece was their carer for years; and if he will make a statement on the matter. [22929/06]

Photo of Brian CowenBrian 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". Apart from the total exemption of transfers between spouses, there are three Group thresholds based on the relationship of the beneficiary to the disponer and these Group thresholds are indexed annually by reference to the Consumer Price Index as published by the Central Statistics Office.

The indexed Group thresholds for 2006 are as follows:

Group A: €478,155. This applies to gifts/inheritances received by a child, a step-child and a foster child from a parent. Group A also applies in certain circumstances to gifts/inheritances received by a parent from a child and by a grandchild from a grandparent.

Group B: €47,815. This applies to gifts/inheritances received by brothers, sisters, nephews, nieces, grandchildren and parents.

Group C: €23,908. This applies to gifts/inheritances received by a beneficiary who does not come under Group A or B.

Any prior gifts or inheritances received by a beneficiary since 5 December 1991 from within the same Group threshold are taken into account when calculating whether gift/inheritance tax is payable on the current gift/inheritance. A niece or nephew who receives a gift or inheritance is entitled to the Group A threshold of €478,155 provided certain conditions are fulfilled. These conditions are that the niece or nephew has worked substantially on a full-time basis for the disponer in the 5 years ending on the date of the gift/inheritance in carrying on the business of the disponer and the gift/inheritance consists of property, which was used in connection with the business.

However, under Section 151 of the Finance Act 2000, an exemption from gift/inheritance tax is available for certain dwelling houses. The purpose of this exemption is to benefit individuals who had been living in a house for a period prior to taking the benefit, either by way of gift or inheritance. The main conditions attaching to the exemption are that the beneficiary of the dwelling house must have resided in the house for a minimum of 3 years prior to the gift or inheritance and must not have had an interest in any other dwelling house. In addition, the beneficiary must continue to occupy that dwelling house as his or her only or main residence for a period of 6 years commencing on the date of the gift/inheritance. This exemption ensures that what may be the family home for many people will not be the subject of gift or inheritance tax when it is transferred.

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