Thursday 29 September 2016

Families 'should be allowed to pay death tax in stages'

Charlie Weston Personal Finance Editor

Published 09/06/2015 | 02:30

Michael Noonan: urged to give priority to increasing tax-free thresholds
Michael Noonan: urged to give priority to increasing tax-free thresholds

Families facing large inheritance tax bills should be allowed to spread the repayments over a five to 10-year period, it has been argued.

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The Irish Independent yesterday highlighted how thousands of ordinary families are finding themselves being hit with huge tax bills as rising property prices push them over exemption limits.

Finance Minister Michael Noonan is to examine the issue around the inheritance tax trap, which is forcing many to sell their parents' homes in order to settle their tax bills with the Revenue Commissioners.

The tax rate for inheritance sky-rocketed during the recession, while the threshold for tax-free inheritance was halved.

The highlighting of the issue by the Irish Independent has prompted a flurry of emails and phone calls to this newspaper.

Fianna Fáil finance spokesman Michael McGrath said inheritance tax was a form of stealth tax.

He called on Mr Noonan to give priority to increasing the tax-free thresholds.

The tax, called capital acquisitions tax (CAT), is imposed at a rate of 33pc on amounts over €225,000 for a son or daughter.

The tax-free threshold has been cut in half since 2008, while the tax rate has jumped from 20pc in 2008 to 33pc now.

Mr McGrath said: "The Government is expecting the yield from tax on gifts and inheritances to increase by 21pc to €400m this year. This illustrates how much of a stealth tax it actually is."

He called for fundamental reform of how the tax is levied.

"I am proposing that we remove the wild variations in the yield by adjusting the thresholds on an annual basis in line with asset price inflation. We should also allow people who find themselves subject to a large CAT bill on illiquid assets to spread out the liability over five to 10 years at a low interest rate."

Smaller families, where there are few people sharing in the inheritance of a property, end up being hit hard by enormous inheritance bills.

Experts say the system is "one of the toughest inheritance tax regimes in the world".

The reduction in the tax-free thresholds has resulted in even modest properties - particularly in Dublin, where house prices are higher - being hit with big tax bills when transferred from parents to offspring,

Farmers and business owners passing on their assets get reliefs worth up to 90pc of the value of the assets they are leaving to loved ones.

But this doesn't apply to ordinary families, where the home is being passed on. However, if a son or daughter is living in the family home for three years or more, there is no tax liability.

Irish Independent

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