Éamon Ó Cuív (Galway West, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

341. To ask the Minister for Finance if he will clarify the rules in relation to the processing of inheritance tax cases; if the rules and-or guidelines applying to thresholds-rates are based on the date of death, the date that probate is granted or accepted; the way changes between these days are handled; if marginal relief is granted; and if he will make a statement on the matter. [31374/15]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I am advised by the Revenue Commissioners that, for the purposes of inheritance tax, the relationship between the person who provides the inheritance (i.e. the disponer) and the person who receives the inheritance (i.e. the beneficiary), determines the maximum life-time tax-free thresholdknown as the "Group Threshold" - below which inheritance tax does not arise. There are, in all, three separate Group Thresholds based on the relationship of the beneficiary to the disponer. These are:

Group A: tax free threshold €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.

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

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

Where the value of an inheritance exceeds a beneficiary's tax-free Group Threshold, inheritance tax is charged at a flat rate of 33% on the amount of the excess.

There are two important dates that are relevant for the taxation of an inheritance. These dates are used for different purposes and are mutually exclusive. Firstly, the date of death of a disponer is the date by reference to which the Group Thresholds and tax rates are determined. Therefore, whatever thresholds and rates are in force on this date apply for the purpose of taxing the value of an inheritance. These rules are based on statute and are strictly applied. There is no provision for marginal relief in circumstances where, for example, a disponer dies within a short time of a change in the statutory thresholds and/or rates.

Secondly, the date on which probate or administration is granted is generally used as the 'valuation date'. This date has no effect whatever on the applicable Group Thresholds and tax rates. The valuation date is the date on which the market value of the assets/property comprising the inheritance is established. This market value is then compared to the relevant Group Threshold and the tax rate applied as appropriate on any excess of the market value over the threshold. This date also determines when any inheritance tax must be paid and a tax return must be submitted to Revenue.

Inheritance tax is a self-assessed tax and tax returns are processed on this basis. As with any other self-assessed tax, Revenue selects a number of cases for compliance checks and audit, generally basing the selection on its risk rules but also based on a certain amount of random selection.