Fergus O'Dowd (Louth, Fine Gael)
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156. To ask the Minister for Finance to respond to concerns raised by a person (details supplied) in respect of what they believe is holding up the supply of properties above shops and so on; and if he will make a statement on the matter. [40982/23]

Michael McGrath (Cork South Central, Fianna Fail)
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Capital Acquisitions Tax (CAT) is a tax on gifts and inheritances that is payable by the person receiving the gift or inheritance (the beneficiary) on the taxable value of the property received.

The relationship between the person giving a gift or inheritance (the disponer) and the beneficiary determines the maximum amount, known as the “Group threshold”, below which CAT does not arise. 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 the relevant Group threshold, CAT at a rate of 33% applies on the excess. For information on CAT thresholds, see www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/index.aspx.

I am advised by Revenue that sections 90 to 102 of the Capital Acquisitions Tax Consolidation Act (CATCA) 2003 provide for a relief from CAT known as “business relief”. Business relief takes the form of a 90% reduction in the taxable value of gifted or inherited business property. CAT is payable on the reduced value, to the extent that it exceeds the relevant Group threshold.

The relief was primarily introduced to encourage enterprise, support the intergenerational transfer of family businesses and to prevent the sale or break-up of businesses in order to pay the CAT liability.

In order for business relief to apply, assets that are the subject of the gift or inheritance must comprise “relevant business property” as defined in the legislation. Relevant business property includes unincorporated businesses, unquoted shares in certain family companies, and 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 (e.g. the letting of furnished or unfurnished accommodation, whether on a long or short-term basis) does not qualify for relief.

The legislation makes specific provision for land and buildings that are not wholly used for the purposes of the business concerned. In such cases, the asset is treated as two separate assets consisting of the part used exclusively for business purposes and the part that is not. This allows for business relief to be claimed in respect of that part of the property that is used wholly and mainly for the business. This provision may be applicable in the types of circumstances described in the constituent’s email to the deputy.

Reflecting the policy rationale for the introduction of business relief, in particular the prevention of the sale or break-up of businesses in order to pay the CAT liability, the legislation provides for business relief to be clawed back if the relevant business property is sold, redeemed or compulsorily acquired within 6 years of the date of the gift or inheritance orif the business ceases to be carried on within that 6-year period. Therefore, relief should not be claimed where the beneficiary of the gift or inheritance does not intend to retain ownership of the relevant business property and carry on the business concerned for the required 6-year period.

This clawback provision may be the “six year penalty” the constituent is referring to in his email.

In the absence of a specific claim for relief, and of knowledge of all the facts pertaining to such a claim, it is not possible to say conclusively whether the relief is available in a particular case or whether it ceases to apply due to the operation of a clawback. However, I am advised that Revenue is not aware of any practice whereby residential properties attaching to businesses are deliberately left vacant so as to avoid a clawback of business relief. As set out above, it is likely that such properties should not be part of the claim for relief in the first instance.

Business relief is dealt with comprehensively in the CAT legislation and further guidance is available in Revenue’s Tax and Duty Manual which is available at www.revenue.ie/en/tax-professionals/tdm/capital-acquisitions-tax/cat-part12.pdf.