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 beneficiary of a gift or inheritance on the value of the property received. It is the relationship between the person providing the gift or inheritance (the disponer) and the person receiving the benefit (the beneficiary) that determines the tax-free threshold (Group threshold) below which CAT does not arise. Any prior gift or inheritance received by a person since 5 December 1991 from within the same Group threshold is aggregated for the purposes of determining whether any CAT 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. There are three Group thresholds:

- the Group A threshold (currently €335,000) applies, inter alia, where the beneficiary is a child (including 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 of the disponer;

- the Group C threshold (currently €16,250) applies in all other cases.

As noted above, the Group A threshold is available to a beneficiary who is a child of the person providing the gift or inheritance. Where a person receives a gift or inheritance from a person other than a parent, the Group B or the Group C threshold will apply depending on the particular relationship that exists between the parties. The Group A threshold will also apply in the case of parents who inherit from their children where the interest taken is not a limited interest.

With regard to the reference to a single individual without children being disadvantaged by these CAT threshold rules, it is important to bear in mind that CAT is not payable by the individual providing the benefit. It is a donee-based tax that is payable by the recipient of a benefit, based on the taxable value of the benefit they receive. Where property is provided by way of gift or inheritance to a number of individuals, they will each have a Group Threshold in relation to that gift or inheritance based on their individual relationship with the disponer. Any prior benefits within the relevant group threshold will be aggregated in the manner outlined above.

In addition, CAT legislation provides for a number of reliefs and exemptions from CAT. Most of these are not contingent on a particular family relationship existing between the disponer and beneficiary. For example, reliefs are available in relation to gifts and inheritances of agricultural property and certain business property where certain conditions are met.

Further information on CAT, including the various CAT reliefs and exemptions, is available on the Revenue website at .

Claire Kerrane (Roscommon-Galway, Sinn Fein)
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99. To ask the Minister for Finance if ACRES payments, both under the general and co-operation projects, are subject to income tax and USC; his views on same; if he will comment on scenarios where an individual receiving two ACRES payments in 2024 will be subject to a greater level of taxation than would otherwise have been the case had ACRES payments been paid in 2023 and 2024, as previously announced, and, as a consequence, will receive a lower level of after-tax support under ACRES; if he is considering action to address this; and if he will make a statement on the matter. [5023/24]

Pearse Doherty (Donegal, Sinn Fein)
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100. To ask the Minister for Finance if ACRES payments, both under the general and co-operation projects, are subject to income tax and USC, his views on same, if he will comment on scenarios where an individual receiving two ACRES payments in 2024 will be subject to a greater level of taxation than would otherwise have been the case had ACRES payments been paid in 2023 and 2024 as previously announced, and, as a consequence, will receive a lower level of after-tax support under ACRES, if he is considering action to address this; and if he will make a statement on the matter. [5025/24]

Michael McGrath (Cork South Central, Fianna Fail)
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I propose to take Questions Nos. 99 and 100 together.

The Agri-Climate Rural Environment Scheme (ACRES) is an income support paid to farmers. ACRES payments will be subject to tax as income and will generally be taxed under Schedule D Case I as a receipt of a trade of farming. In the case of individual farmers, an ACRES payment will be subject to income tax and USC.

In general, payments in the form of income supports to farmers are paid in respect of a full calendar year and taxed in that year. However, in cases where the payment for the relevant year has not issued until the following year, the assessable income for tax purposes will be dependent on the basis of accounting adopted by the farmer.

The earnings basis is the strictly legal basis for drawing up accounts for tax purposes, however, I have been advised that Revenue will accept either the earnings basis or the receipts basis provided taxpayers apply the basis consistently and there is no significant loss of revenue over that which would arise if the accounts were prepared on a full earnings basis.

Using the earnings basis, the ACRES payment may be recognised as a receipt accrued over the calendar year in respect of which it was paid. For example, in a case where a farmer’s accounts are made up to 31 December annually, the ACRES payment for the year 2023, regardless of when it is paid, will form a receipt of the year ended 31 December 2023 (2023 tax year).

Under the receipts basis, the ACRES payment may be recognised as a receipt pertaining to the date the payment is issued by the Department of Agriculture, Food and the Marine (DAFM). For example, if accounts are made up to 31 December annually, the ACRES payment for the year 2023, if paid in February 2024, will form a receipt of the year ended 31 December 2024 (2024 tax year).

Where the use of the receipts basis would result in no ACRES payment being recognised in a 12-month basis period (e.g. where the issue of the ACRES payment is delayed until after the year-end), the returns of that and subsequent periods may be submitted on the earnings basis.

It should be noted that Revenue reserves the right to carry out reviews if persons change the basis on which their accounts are prepared.