Thursday 23 February 2017

Budget 2017: Inheritance tax changes to hurt childless families

Kevin Doyle

Kevin Doyle

Finance Minister Michael Noonan intends to raise the value of property that parents can leave to their children without paying tax – but will not offer any relief to other relatives. Photo: Tom Burke
Finance Minister Michael Noonan intends to raise the value of property that parents can leave to their children without paying tax – but will not offer any relief to other relatives. Photo: Tom Burke

Childless families will lose out as a result of changes to the inheritance tax regime planned for Budget 2017.

Finance Minister Michael Noonan intends to raise the value of property that parents can leave to their children without paying tax - but will not offer any relief to other relatives.

The plan is causing considerable disquiet within Fianna Fáil, with rural TDs in particular telling their finance spokesperson Michael McGrath to make "a big push" to have the rights of siblings recognised.

The Irish Independent understands that Mr Noonan intends to increase the current inheritance tax threshold from €280,000 to at least €320,000.

However, this will only apply in 'Category A' cases, where the assets are passing directly from parents to their children.

A person left assets by a sibling, an aunt or uncle or a grandparent (Category B) will face Capital Acquisitions Tax at a rate of 33pc once the value of the assets bequeathed exceeds just €30,150.

And a non-blood relative (Category C) who is the beneficiary of a will is hit with inheritance tax once the assets are valued at more than €15,075.

Read more: Comment: High earners pay more than their fair share in tax, while others get a free ride

Fianna Fáil is arguing that the second two categories should see a pro-rata increase in their thresholds.

"One concern is for siblings in rural areas who live together but the one who passes away owns the house and land. The surviving brother or sister can find themselves left with no capacity to pay such a bill," said a source.

Another TD argued that the current plans being tabled "do not recognise the diversity of modern families".

Thresholds

It is understood that Mr McGrath is to argue the case for a much broader adjustment of the thresholds when he meets with Mr Noonan this week for a briefing ahead of next Tuesday's Budget. "He was told to go back to Michael Noonan and make our position clear on this," a source said. However, Fine Gael sources reiterated that limited resources mean that widespread reform of the inheritance system won't happen.

The Programme for Government, agreed between Fine Gael and the Independent Alliance, commits to raising the Category A threshold to €500,000 over the lifetime of the Government.

However, it makes no mention of the other categories. The amount of Capital Acquisitions Tax collected by the State has increased by 65pc since 2011.

Read more: Revealed: Cigarettes, diesel to rise in Budget but squeezed middle to gain as little as €2 a week

Revenue took in €156m in tax from sons and daughters last year, compared with €183m from people who fall into Category B and €59m from Category C.

Meanwhile, the Dáil's Budget Oversight Committee published its report last night which notes the intention of the minister to change the thresholds "in respect of family homes".

"The Tax Strategy Group Papers outlined that the cost of increasing the threshold to €500,000 for a parent to child inheritance would amount to €75m per annum.

"The Minister indicated that he proposed to increase the thresholds over a number of budgets, due to the cost thereof," it says.

The report adds that "some members" of the cross-party committee support the approach taken by Mr Noonan.

Irish Independent

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