Michael McGrath (Cork South Central, Fianna Fail)
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258. To ask the Minister for Finance the policy position in relation to the taxation treatment when a person wishes to pass on a non-farming business to adult children; and if he will make a statement on the matter. [47007/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am informed by Revenue that for gift and inheritance tax purposes, 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 amount known as the “Group threshold” below which gift or inheritance tax does not arise.

There are three separate Group thresholds based on the relationship of the beneficiary to the disponer. The Group A threshold (currently €310,000) applies, inter alia, 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.

I am further informed by Revenue that sections 90 to 102 of the Capital Acquisitions Tax Consolidation Act (CATCA) 2003 provide for business relief. The relief takes the form of a 90% reduction in the taxable value of gifted or inherited business property.

In order for business relief to apply, business assets that are the subject of the gift or inheritance must constitute what is defined as ‘relevant business property’. Included in the definition of relevant business property are unincorporated businesses, unquoted shares in certain family companies, and also assets used wholly or mainly for the purposes of a business carried on by a family company or a partnership, but not owned by the company or partnership. A business consisting wholly or mainly of dealing in land, shares, securities or currencies or making or holding investments does not qualify for business relief.

The relevant business property must also have been owned by the disponer for a minimum period prior to the gift or inheritance in order to qualify for business relief.  The minimum period for gifts is 5 years and the minimum period for inheritances is 2 years.

Business relief is clawed back if the relevant business property is sold or compulsorily acquired within 6 years of the date of the gift or inheritance or if the business ceases to be carried on within that 6 year period.  A claw-back of business relief will be avoided if the sold relevant business property is replaced within a year of the sale by other qualifying relevant business property.

The position as regards gift and inheritance tax is, therefore, that parents can transfer a family business with a market value of up to €3,100,000 to a child without any charge to gift or inheritance tax arising on the transfer, providing the parents, the child and the business assets each meet the conditions for business relief and providing the child has received no prior gifts or inheritances from his or her parents under the Group A threshold.