Written answers
Wednesday, 26 November 2014
Department of Finance
Tax Exemptions
Lucinda Creighton (Dublin South East, Independent)
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52. To ask the Minister for Finance further to Parliamentary Question No. 184 of 18 November 2014, the evidence that the CAT exemption is being used to provide significant sums tax-free to adult children; and if he will make a statement on the matter. [45486/14]
Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that in the course of their compliance programmes they have established that this exemption, designed to cater for normal everyday payments related to the provision of support, maintenance or education for children, is being abused.
For taxpayer confidentiality reasons, the Revenue Commissioners are not in a position to disclose specific details of cases in which they established that the relief was abused. However, they have provided a number of anonymised examples:
- Exemption claimed where a wealthy individual gifted a house worth €400,000 to an adult child.The full extent to which this exemption is being abused cannot be determined because CAT is a self-assessment tax and there is no obligation to submit returns to the Revenue Commissioners in respect of any benefit that is exempt from tax under Section 82. However, in addition to cases identified by the Revenue Commissioners in the course of their compliance programmes, it has also been brought to their attention by a concerned tax practitioner that this exemption is subject to widespread abuse.
- Exemption claimedin respect of €90,000 of a cash gift to an adult child to purchase a car and furnish and maintain a house. The adult child was not a dependent and had substantial income in her own right.
- Taxpayer given free use of a credit card through which over €150,000 was gifted in a two year period.
Over and above payments for support, maintenance or education, the legislation also exempts from CAT gifts up to €3000 in any one year from any one personthus two parents can gift €6,000 to each child in any year without giving rise to a CAT liability. Gifts over this amount only give rise to a CAT liability if the Group Tax Threshold (Parent to Child) of €225,000 is fully utilised. Beyond these exemptions it is difficult to justify making any further allowance to parents who look for other means of making tax-free gifts to their children by trying to bring them within the terms of Section 82 of the Capital Acquisitions Tax Consolidation Act 2003.
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