Michael Cahill (Kerry, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

279. To ask the Minister for Finance if he will address the anomaly that exists in regard to inheritance tax in respect of childless couples (details supplied); and if he will make a statement on the matter. [13406/25]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Capital acquisitions tax (CAT) is a tax which applies to both gifts and inheritances. For 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 following changes to the CAT tax-free thresholds came into effect; from midnight on Budget Day (i.e. from 2 October 2024 inclusive)

The Group A threshold increased from €335,000 to €400,000 and applies where the beneficiary is a child, including adopted children, stepchildren and certain foster children, of the disponer.

The Group B threshold increased from €32,500 to €40,000 and 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 increased from €16,250 to €20,000 and applies in all other cases.

The standard rate of CAT is 33% in respect of gifts and inheritances taken on or after 6th December 2012. This rate has remained unchanged.

For clarity it is useful to note that the definition for children for CAT purposes includes any stepchildren, adopted children or certain foster children. All 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.

Furthermore, it is worth noting that there is an exemption from CAT where dwelling houses are bequeathed by individuals 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. It is not necessary for the beneficiary of an inheritance under the dwelling house exemption to be a child or relative of the disponer.

CAT thresholds along with all other tax is kept under review by Department of Finance officials. It is important to note there would be a significant cost in making substantial changes to CAT, and any such changes can only be considered in the context of the annual Budget and Finance Bill process.