Finian McGrath (Dublin North Central, Independent)
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Question 164: To ask the Minister for Finance if he will clarify a matter (details supplied) regarding the fair deal scheme. [4083/12]

Michael Noonan (Limerick City, Fine Gael)
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The matter of the proceeds of a family home depends on the circumstances of the case. However, I understand the Deputy is concerned about the tax treatment of capital in the case where a family home is sold. I have been informed by the Revenue Commissioners that under the Fair Deal Scheme the recipient of nursing home care is treated as accepting a loan from the HSE. He /she undertakes that the loan will be discharged after death by his/her Personal Representative. As part of the loan process a charge, similar to a mortgage, is placed on the home, and the house is security for eventual repayment after death.

The capital gains tax treatment of a disposal of the home by the Personal Representative is no different in this situation than would apply if the Fair Deal Scheme had not operated. A Capital Gains Tax charge will not arise on the death of the deceased. The Personal Representative will sell the house (if the 15% due under the Fair Deal Scheme is not otherwise capable of being paid by him out of the person's estate). For capital gains tax purposes, a Personal Representative takes assets at market value at the date of death. Any gain/loss is calculated as the difference between this market value at the date of death and the sale proceeds, less allowable costs of the disposal. If it is the case that the house is sold for less than the market value at the date of death then no capital gains tax liability will arise.

The Personal Representative is responsible for paying any capital gains tax resulting from any gain on the disposal of the house. The proceeds from the sale of the house and any other assets of the person less the capital gains tax paid will form part of the person's estate. The 15% due under the Fair Deal Scheme is, I understand, payable out of the person's estate before it can be distributed among beneficiaries in the usual manner.

Capital Acquisitions Tax is the overall name for both Inheritance Tax and Gift Tax. Only the net proceeds of the sale of the house will form part of the deceased persons estate for Inheritance Tax purposes, (having deducted from the sale proceeds any Capital Gains Tax paid when the property was sold and also having deducted from the sale proceeds the amount of the sale proceeds being paid over to the HSE). The net proceeds of sale, as stated, will then form part of the deceased persons estate, along with any other assets owned by the deceased. There is no Inheritance Tax on assets inherited by a spouse or by a civil partner of the deceased.

Apart from the exemption for spouses and civil partners, there are three tax – free thresholds – known as Group thresholds - for other beneficiaries. Group A : €250,000 - applies where the beneficiary is a child ( including adopted child, step-child and certain foster children) or minor child of the deceased. Parents also fall within this threshold where they take an inheritance of an absolute from a child. Group B : €33208 – applies where the beneficiary is a brother, sister, a nephew, a niece or lineal ancestor or lineal descendant of the deceased. Group C: €16,604 - applies in all other cases. If the value of gifts and inheritances received by a beneficiary since 5 December 1991 exceeds his or her Group threshold, then a rate of CAT of 30% will apply on the difference.