Kieran O'Donnell (Limerick City, Fine Gael)
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182. To ask the Minister for Finance the allowances in place to ensure a reduced inheritance tax liability for a disabled child who inherits money or possessions on the death of a sole living parent; and if he will make a statement on the matter. [38033/14]

Michael Noonan (Limerick City, Fine Gael)
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Capital Acquisitions Tax (CAT) is the overall name for both gift and inheritance tax.

For the purposes of CAT, the position is that 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 tax-free threshold known as the "Group threshold" below which gift or inheritance tax does not arise.

There are, in all, three separate Group tax-free thresholds based on the relationship of the beneficiary to the disponer.

Group A: €225,000- applies where the beneficiary is a child (including adopted child, step-child 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: €30,150- applies where the beneficiary is a brother, sister, a nephew, a niece or lineal ancestor or lineal descendant of the disponer.

Group C: €15,075- applies in all other cases.

Any prior gifts or inheritances received by a child from their parents since 5 December 1991 are aggregated for the purposes of determining whether any tax is payable on the current benefit.

A child can therefore receive gifts or inheritances from their parents up to the value of €225,000 without incurring any liability to CAT.

Apart from these tax-free thresholds, a number of exemptions and reliefs from CAT are provided in CAT legislation.

Section 82(4) Capital Acquisitions Tax Consolidation Act 2003 exempts from CAT money or money's worth provided by deceased parents for the benefit of a minor child (whether incapacitated or not) for normal support, maintenance or education.

Section 84 Capital Acquisitions Tax Consolidation Act 2003 provides that a gift or inheritance taken exclusively to discharge 'qualifying expenses' of an individual who is permanently incapacitated shall be exempt from CAT. 'Qualifying expenses' is defined as expenses relating to medical care, including the cost of maintenance in connection with such medical care. This would include all hospital charges, doctor's fees, medicines and other pharmaceutical fees, and also includes the cost of maintenance in connection with medical care.

In order for the exemption to apply there must be evidence from the disponer, either by will or otherwise, that he or she has provided the benefit exclusively for these purposes.

It is to be noted that any gifts or inheritances exempted from CAT under sections 82 or 84 Capital Acquisitions Tax Consolidation Act 2003 do not reduce the CAT tax-free threshold of a child of €225,000, which is preserved without reduction against the value of other gifts and inheritances taken by the child from their parents.