Written answers

Wednesday, 2 November 2016

Photo of Jim DalyJim Daly (Cork South West, Fine Gael)
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105. To ask the Minister for Finance if he will clarify an issue (details supplied) in respect of inheritance tax; and if he will make a statement on the matter. [32669/16]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I am informed by Revenue that a double taxation treaty between Ireland and the UK provides for the relief of double taxation in respect of inheritances that are taxed in both jurisdictions. The treaty is based on the credit method of relief, i.e. both countries impose tax on inheritances under their own domestic law and, in relation to property, the country where the property is situated generally has primary taxing rights, with the country imposing tax for some other reason (for example, based on the residence of the disponer/beneficiary) giving credit for the tax payable in the country where the property is situated.

There are two important dates that are relevant for the taxation of an inheritance in Ireland. These dates are used for different purposes and have separate status. 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. Secondly, the date on which probate or administration is granted is generally used as the 'valuation date'. These rules are based on statute and are strictly applied. The valuation date is the date on which the value of the assets/property comprising the inheritance is to be established. This 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 is to be paid and a tax return submitted to Revenue. The UK applies a different treatment in that the estate of the deceased person is valued at the date of death.

As with any tax or duty, key dates relating to the charging and administration of a particular tax or duty are given a statutory basis. This is a necessary part of any taxation system and ensures that both taxpayers and tax authorities have certainty in relation to the rules that determine how tax is to be charged. To vary these dates as the values of, say, shares, property, or currency fluctuate, or depending on how particular taxpayers are impacted by such fluctuations, would make for a very arbitrary and uncertain taxation system and would ultimately undermine the tax system. As with any value fluctuations, there will be both winners and losers and, unfortunately, for this particular person the recent sterling volatility has resulted in a higher than expected tax liability.

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