Michael Healy-Rae (Kerry, Independent)
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290. To ask the Minister for Finance his views on a matter (details supplied) regarding inheritance law here; and if he will make a statement on the matter. [25535/16]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by Revenue that there are two forms of relief from Capital Acquisitions Tax (CAT) which may be relevant in the circumstances outlined in your question.

The first, known as 'agricultural relief', may apply to reduce the taxable value of a gift or inheritance of agricultural property, including land, by 90% once certain conditions are satisfied. The second, referred to a 'favourite nephew or favourite niece relief', applies the higher Group A tax-free threshold for CAT liability, normally applied to gifts or inheritances between parents and children, to a niece or nephew in certain circumstances. Both reliefs may apply to the same gift or inheritance.

Section 89 of the Capital Acquisitions Tax Consolidation Act (CATCA) 2003 provides for agricultural relief. The relief takes the form of a 90% reduction in the taxable market value of the gifted or inherited agricultural property.

To qualify for the relief the person taking the gift or inheritance (the 'beneficiary') of the agricultural property must qualify as a 'farmer' for the purpose of section 89 CATCA 2003. This means that a beneficiary's agricultural property must comprise at least 80% by gross market value of the beneficiary's total property at a particular date. In addition, for gifts and inheritances taken on or after 1 January 2015 a beneficiary, or a lessee where the beneficiary leases the agricultural land, must actually farm the land for a period of at least 6 years after taking the gift or inheritance.

The relationship between the person who provides the gift or inheritance (i.e. the disponer) and 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: €280,000 - 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 gift or inheritance received by a beneficiary since 5 December 1991 from within the same Group threshold is aggregated for the purposes of determining whether any tax is payable on the current benefit. Tax at the rate of 33% is payable on any excess received over the relevant tax-free threshold.

Ordinarily, a nephew or niece of a disponer is entitled to the Group B tax-free threshold of €30,150. However, a nephew or niece who has worked substantially on a full-time basis for a period of five years prior to the gift or inheritance in carrying on, or assisting in the carrying on, the trade, business or profession of the disponer is entitled to the Group A tax-free threshold of €280,000 for the purposes of computing the tax payable on any gift or inheritance received by him or her of those business assets. This relief is known as favourite nephew or favourite niece relief and applies equally to a nephew or a niece who satisfies the conditions for the relief.

This specific relief is targeted at gifts or inheritances of business assetsin circumstances where the nephew or niece has, by their continued presence on a weekly basis, placed their labour and expertise at the disposal of the disponer thereby ensuring that material benefit is conferred on the business. The relief is designed to ensure that, in those circumstances, the higher Group A tax-free threshold of €280,000 is available to the deserving nephew or deserving niece. 

This means that, provided a nephew or niece satisfies the relevant conditions, they could inherit a farm from an aunt or an uncle and qualify for both agricultural relief and favourite nephew or favourite niece relief on that transfer. Assuming the nephew or niece has no previous gifts of inheritances under the Group A tax-free threshold since 5 December 1991, they could potentially inherit a farm from an aunt or uncle with a value of up to €2,800,000 without any liability to CAT arising.