Cormac Devlin (Dún Laoghaire, Fianna Fail)
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211. To ask the Minister for Finance if he will consider increasing the tax-free thresholds at which children in Group A and close relatives in Group B can inherit property and assets from their family as part of Budget 2023; and if he will make a statement on the matter. [45534/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy may be aware, for Capital Acquisitions Tax (CAT) purposes, the relationship between the person giving a gift or inheritance (i.e. the disponer) and the person who receives it (i.e. the beneficiary) determines the maximum amount, known as the “Group threshold”, below which CAT does not arise.

The Group A threshold (currently €335,000) applies, inter alia, where the beneficiary is a child (including adopted child, stepchild and certain foster children) of the disponer. The Group B threshold (currently €32,500) applies where the beneficiary is a brother, sister, nephew, niece or lineal ancestor or lineal descendant such as a grandchild of the disponer. The Group C threshold (currently €16,250) 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 a benefit. Where a person receives gifts or inheritances that are in excess of his or her relevant tax-free threshold, CAT at a rate of 33% applies on the excess benefit.

While a disponer may have no natural children, any stepchildren, adopted children or certain foster children can avail of the Group A threshold in respect of gifts and inheritances received from that disponer.

In addition, nieces or nephews of that disponer may qualify for favourite niece or favourite nephew relief in respect of gifts or inheritances of business assets. The relief allows a niece or nephew who qualifies for the relief to avail of the Group A threshold. Qualifying nieces or nephews are those who have worked substantially on a full-time basis for a period of five years prior to the gift or inheritance being given in carrying on, or assisting in the carrying on, the trade, business or profession, of the disponer.

For the nephew or niece to be deemed to be working substantially on a full-time basis in the business he or she must work:

- more than 24 hours per week at the place where the business, trade or profession is carried on; or

- more than 15 hours per week at the place where the business, trade or profession is carried on exclusively by the disponer, any spouse or civil partner of the disponer and the nephew or niece.

Recent Revenue estimates put the full cost of increasing the CAT Group A threshold alone from its current €335,000 to €400,000, for example, at approximately €47 million. The full cost of increasing the CAT B threshold from its current €32,500 to €35,000 is approximately €8 million.

It is worth noting that there is an exemption from CAT where dwelling houses are bequeathed by individuals who live there to successors who:

- have lived there for a specified period of time before the inheritance,

- will continue to live there for a specified period of time after the inheritance, and

- who have no beneficial interest in any other residential property at the date of the inheritance.

The policy rationale behind the dwelling house exemption is to protect the family home by ensuring that a beneficiary who has been living with the disponer, and will continue to reside there after the inheritance, does not have to sell that family home to pay a CAT liability and thus will continue to have somewhere to live.

The options available for providing increases to CAT thresholds are considered in the context of available resources as part of the annual budgetary and Finance Bill process and, like all matters, need to be balanced against competing demands.