Eoghan Murphy (Dublin South East, Fine Gael)
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174. To ask the Minister for Finance if he will provide further details regarding the Finance Bill (details supplied). [45878/14]

Michael Noonan (Limerick City, Fine Gael)
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Section 82 of the Capital Acquisitions Tax Consolidation Act 2003 exempts certain receipts from Capital Acquisitions Tax. Under section 82(2), normal and reasonable payments made by a disponer, during his or her lifetime, for the support, maintenance or education of their children (including the children of a civil partner), or to a person to whom the disponer stands in loco parentis, or to a dependent relative of the disponer, are exempt from CAT.

This Section 82 exemption is being amended in this year's Finance Bill, because the Revenue Commissioners in the course of carrying out Revenue compliance programmes have established that this exemption is being abused to provide significant tax-free gifts of money and assets to adult children far in advance of the intention of the exemption. In addition, it has also been brought to the Revenue Commissioners' attention by a concerned tax practitioner that this exemption is subject to widespread abuse. 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 legally exempt from tax under Section 82.

The amendment to section 82(2) is intended to ensure, where there is a need to make provision for support, maintenance or education of children, that the exemption is confined to normal and reasonable payments made to minor children; to children under the age of 25 years who are in full-time education and to children regardless of age who are permanently incapacitated by reason of physical or mental infirmity from maintaining themselves.

It is important to note that, apart from this particular exemption, parents can make gifts to their children within certain limits, without giving rise to a CAT liability. For example, parents can each gift €3,000 in any year to each of their children (that's €6,000 a year to each child if both parents wish to make such gifts). Parents can also gift the same amounts to partners of their children (e.g. fiancé, fiancée, daughter-in-law, son-in-law) free of CAT. In effect parents can gift up to €12,000 in each year to their children and partners in these circumstances.

Any such payments within these limits do not reduce the parent to child Group Threshold of €225,000, which remains intact for future larger gifts and inheritances.