Paschal Donohoe (Dublin Central, Fine Gael)
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Capital Acquisitions Tax (CAT) is a beneficiary based tax on gifts and inheritances that is payable on the value of the property received. 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.

There are three Group thresholds:

• the Group A threshold (currently €400,000) applies where the beneficiary is a child of the person giving the gift or inheritance
• the Group B threshold (currently €40,000) applies where the beneficiary is a brother, sister, nephew, niece, lineal ancestor or lineal descendant of the person giving the gift or inheritance
• the Group C threshold (currently €20,000) applies in all other cases.

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.

My officials are reviewing CAT as part of the annual Tax Strategy Group papers. These papers outline the tax policy considerations for the Government and the options available to it in forming this year’s Budget. They are published in advance of the Budget and are the best means of considering inheritance tax in an analytical and transparent way.

Finally, it is important to be aware that the options available for providing changes to CAT threshold parameters must be considered in the context of available resources and must also be balanced against competing demands.