Terence Flanagan (Dublin North East, Fine Gael)
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To ask the Minister for Finance if he will respond to a query regarding capital acquisitions tax (details supplied); and if he will make a statement on the matter. [43842/12]

Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that for the purposes of Capital Acquisitions Tax (Gift and Inheritance Tax), the relationship between the person who provides the gift or inheritance (i.e the disponer) and the person who receives the gift or inheritance (i.e the beneficiary), determines the maximum life-time tax-free threshold- known as the “Group threshold” below which gift or inheritance tax does not arise. There are, in all, three separate Group thresholds based on the relationship of the beneficiary to the disponer.

Group A: €250,000 - applies where the beneficiary is a child (including adopted child, stepchild and certain foster children) or minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an inheritance of an absolute interest from a child.

Group B: €33,500 – applies where the beneficiary is a brother, sister, a nephew, a niece or lineal ancestor or lineal descendant of the disponer.

Group C: €16,750 -applies in all other cases.

The Group A threshold of €250,000 applies to both gifts and inheritances taken by a child from a parent. The Group A threshold also applies to inheritances taken by a parent from a child, where the inheritance is a full absolute interest in the inherited property and is not a limited interest (e.g. an interest in the inherited property for the life of the parent). The Group A threshold also applies where the inheritance taken by the parent is taken on the death of the child as opposed to, for example, an inheritance taken by the parent at a later date on the death of an intervening life tenant.

Gifts by children to parents fall within the Group B tax-free threshold of €33,500. Separately, Section 79 Capital Acquisitions Tax Consolidation Act 2003 provides that, subject to certain conditions, an inheritance taken by a parent from a child is completely exempt from Inheritance Tax and does not fall to be taken into account in calculating tax on later gifts or inheritances from any source. There are two conditions to be satisfied before the Inheritance Tax exemption is available:

(i) the inheritance must be taken on the death of the child; and

(ii) within the five year period prior to the death of the child, the child must have taken a taxable gift or inheritance from either or both of his/her parents.

Where a beneficiary receives benefits in excess of his or her Group threshold, a 30% rate of Capital Acquisitions Tax applies on the difference.

In summary, the Group A threshold of €250,000 applies to all gifts and inheritances taken by a child from a parent and equally applies also to all absolute inheritances taken by a parent from a child. Inheritances taken by a parent from a child may also qualify for complete exemption from Inheritance Tax where the inheritance taken is an absolute inheritance and where the child has taken a taxable gift or inheritance from either parent in the previous five years.