Joan Burton (Dublin West, Labour)
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Question 237: To ask the Minister for Finance his views on the increasing number of high net worth individuals avoiding capital acquisitions tax on multi-million euro house transfers due to children using the property as their residence for three years plus; if an audit of such transactions has been conducted by the Revenue Commissioners; the number of such transactions that have taken place for each of the years 2004, 2005 and 2006; if he will estimate the sum of capital acquisitions tax avoided in this manner for each of the above years; and if he will make a statement on the matter. [12475/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am advised by the Revenue Commissioners that section 86 of the Capital Acquisitions Tax Consolidation Act 2003, subject to conditions, grants exemption from Capital Acquisitions Tax in respect of a house comprised in a gift or inheritance. The conditions require that the donee or successor must occupy the house for the period of 3 years ending with the date of the gift or inheritance. Where that house has replaced other property, the beneficiary must have resided either in that house or in the other property for periods which, taken together, amounted to 3 years in the 4-year period prior to the date of the gift or inheritance. In addition, the donee or successor, if under the age of 55, must continue to occupy the house as his or her only or main residence for a further period of 6 years. However, there is provision to allow for a replacement house in that period and for situations where the individual concerned is not in occupation of the house because of work obligations abroad.

The total number of claims for relief under section 86 of the Capital Acquisitions Tax Consolidation Act 2003 which were made in each of the years 2004, 2005 and 2006 were 553, 542 and 680 respectively. Data is not captured in the Revenue database in a manner which would enable the values of properties subject to section 86 claims to be separately identified. However, on the basis of a recent once-off survey carried out by the Revenue Commissioners, it was established that the aggregate value of the 542 properties for which claims under section 86 were made in 2005 was some €140 million.

Claims for relief under section 86 of the Capital Acquisitions Tax Consolidation Act 2003 in respect of high-value houses are verified. Amendments to section 86 are being made in the current Finance Bill, which was passed by the Seanad last week. These amendments are as a result of Revenue's experience in administering claims under this section, including taking issues before the Appeal Commissioners.

Firstly, relief will not be available where a donee lives in the principal private residence of the donor, where that residence is gifted, unless the donor is compelled by reason of old age or infirmity to depend on the services of the donee. This is to counter, in particular, the argument that, where the donee, having until then lived in the parental home, is gifted a house by a parent, the 3 year period of occupancy of the gifted house is satisfied.

The second change will require that the gifted house be owned by the donor during the 3-year period even if they were not his or her principal private residence. This is to counter a claim for relief where an individual sells his principal private residence to his parent for full value and the house is then gifted back to that individual by his parent. It also counters the use of family trusts in gifting houses to children.