Denis Naughten (Longford-Roscommon, Fine Gael)
Link to this: Individually | In context

Question 289: To ask the Minister for Finance the maximum value of cash which can be transferred to a niece or nephew which is exempt under inheritance tax; when this level was last increased; the plans he has to increase this threshold; and if he will make a statement on the matter. [33124/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

For the purpose of Gift and Inheritance Tax, the relationship between the person who provided the gift or inheritance (i.e. the disponer) and the person who received the gift or inheritance (i.e. the beneficiary), determines the maximum tax free threshold — known as the "group threshold". Three Group thresholds exist, which are indexed annually by reference to the Consumer Price Index. The indexed Group thresholds for 2004, 2005 and 2006 are set out in the table below.

The current threshold for gifts/inheritances made to a niece or nephew of the disponer is €47,816 and where the value of the gift or inheritance is greater than this, a single low 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, they are treated as a child of the disponer for CAT purposes, and instead of a Group B threshold (currently €47,815) they are entitled to a Group A threshold (currently €478,155) 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 (in other words, a nephew/niece in law will not qualify) and he/she must 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 and was not intended to apply generally to all gifts or inheritances taken by nieces/nephews. Applying the relief to all such disposals would lead to a reduction in the tax base. As the Deputy will appreciate, it is not the practice to comment in the lead up to the annual Budget and Finance Bill on the intention or otherwise to make changes in taxation.