Terence Flanagan (Dublin North East, Independent)
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225. To ask the Minister for Finance his views on the effect the reduction in the threshold for capital acquisitions tax (details supplied) is having on persons' lives; and if he will make a statement on the matter. [5815/15]

Terence Flanagan (Dublin North East, Independent)
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227. To ask the Minister for Finance his plans to change the threshold for the capital acquisitions tax (details supplied) in County Dublin; and if he will make a statement on the matter. [5829/15]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 225 and 227 together.

Capital Acquisitions Tax (CAT) is the overall title for both Gift and Inheritance Tax. The tax is charged on the amount gifted to, or inherited by, the beneficiary of the gift or inheritance.

For the purposes of CAT, 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:

The Group A tax-free threshold of €225,000applies 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.

The Group B tax-free threshold of €30,150 applies where the beneficiary is a brother, sister, nephew, niece or lineal ancestor or lineal descendant of the disponer.

The Group C tax-free threshold €15,075 applies in all other cases.

Where a person receives gifts or inheritances in excess of their relevant tax free threshold, CAT at a rate of 33% applies on the excess over the tax free threshold. It should also be noted that the thresholds apply on an individual basis so that, for example, where there are two children the current Group A threshold of €225,000 applies individually to each child in respect of gifts and inheritances from their parents.

The Group thresholds have been reduced over recent years, as asset prices have fallen, in order to maintain the yield from capital taxes as part of the effort to restore the public finances. Taxes on capital are less harmful from an economic perspective than taxes on employment.

The property market continues to improve with positive developments which had been restricted to the Dublin area now manifesting in other areas of the country though not to the same extent in terms of price rises. I recognize, of course, that there are supply issues in certain areas of the Dublin property market.

The Group tax-free thresholds are kept under review, in the same way as other relevant tax provisions, and in this regard I will bear the Deputy's comments and concerns in mind for the future.

In the details supplied with his first question, the Deputy refers to a constituent who is concerned about the CAT implications arising from being bequeathed the family home, in which I understand from the details that the constituent still resides. I would point out to the Deputy that Section 86 of the Capital Acquisitions Tax Consolidation Act 2003 provides for a specific exemption from CAT in respect of a gift or inheritance of a dwelling house.

This exemption was introduced to cater for persons who had been living in the disponer's house for a substantial period prior to the gift or inheritance and who might otherwise be faced with having to sell the house (their home) to pay the CAT liability. This would apply in particular to children who continued to reside with their parents into their old agevery often to care for them. The following are the main conditions to be satisfied in order to benefit from the dwelling house CAT exemption:

- The recipient must have occupied the dwelling house continuously as his or her only or main residence for a period of three years prior to the date of the gift or inheritance

- The recipient must not , at the date of the gift or inheritance, be beneficially entitled to any other dwelling house or have an interest in any other dwelling house

- The recipient must continue to occupy the dwelling house for a period of six years commencing on the date of the gift or inheritance, except where the recipient was aged 55 years at that date or dies in this period. 

The Deputy's constituent may wish to contact her local Revenue Office if she needs to clarify any issue in relation to this exemption.