Michael McGrath (Cork South Central, Fianna Fail)
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Capital Acquisitions Tax (CAT) is the tax that applies to gifts and inheritances. The relationship between the person who provides a gift or inheritance (the disponer) and the person who receives a gift or inheritance (the beneficiary) determines the maximum tax-free threshold (Group threshold) below which CAT does not arise.

Any prior gifts or inheritances received by a beneficiary since 5 December 1991 from within the same Group Threshold is aggregated for the purposes of determining whether any CAT is payable on a current benefit.

There are three tax-free Group thresholds:

• 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 of the disponer;
• the Group C threshold (currently €16,250) applies in all other cases.

Ordinarily, a nephew or niece of a disponer is entitled to the Group B Threshold of €32,500. However, I am advised by Revenue that the Capital Acquisitions Tax Consolidation Act 2003 provides for the application of the Group A Threshold (€335,000) where a nephew or niece of the disponer receives a gift or inheritance of certain business assets from the disponer and meets specific conditions in relation to working in that business. This is commonly referred to as “Favourite Nephew/Niece Relief”.

Favourite Nephew/Niece Relief will apply where:

• the nephew or niece has worked substantially on a full-time basis for 5 years prior to the date of the gift or inheritance for the disponer in carrying on, or assisting in carrying on, the trade, business or profession of the disponer, and
• the gift or inheritance consists of property that was used in connection with the business, trade or profession of the disponer.

A nephew or niece is not deemed to be working substantially on a full-time basis in the trade, business or profession of the disponer/company unless he or she works:

• more than 24 hours a week for the disponer, at a place where that business, trade or profession is carried on, or,
• more than 15 hours a week for the disponer, at a place where that business, trade or profession is carried on exclusively by the disponer, the spouse or civil partner of the disponer, and the nephew or niece.

I am advised by Revenue that the zoning status of land that is the subject of an inheritance should not impact on the availability of Favourite Nephew/Niece Relief provided that the conditions noted above are met.

Further information on favourite nephew or favourite niece relief is available on the Revenue website at www.revenue.ie/en/gains-gifts-and-inheritance/cat-reliefs/favourite-nephew-or-niece-relief/index.aspx.