13,000 families forced to pay inheritance tax
Homeowners selling houses to meet bills after rate hikes
Published 07/09/2016 | 02:30
Thousands more families have been drawn into the inheritance tax net as rising property prices push them over the exemption limit.
Almost 3,330 more families have been dragged into paying inheritance tax since 2011, with a 53pc rise in the amount raised by the State.
Rising property prices and changes made to the rate at which the tax applies, and lower thresholds where it applies, have caught families in a tax pinch, prompting multiple calls for changes to the tax as middle-income families are being unexpectedly hit with huge bills. This situation has forced some families to sell homes they had inherited to meet the tax bill, it has been claimed.
Last year, close to 13,000 families were hit with capital acquisitions tax, better known as inheritance tax.
This was up from 9,700 in 2011, soon after the bailout by the International Monetary Fund, the European Union and the European Central Bank.
The tax is applied to gifts and inheritances.
This country has one of the toughest inheritance tax regimes in the western world.
The rate that the tax is imposed at is the seventh highest in the countries that are members of the Organisation for Economic Co-operation and Development (OECD).
Last year, the yield to the Exchequer was €400m.
The 2015 yield was up from €244m in 2011. This means the Government has seen the amount of money it is taking in from the tax surge by 64pc between 2011 and last year.
Provisional figures for this year show that the tax has so far raised €375m, according to the State's Tax Strategy Group.
This has prompted calls for the Government to keep its promise to ease the burden of the tax in the Budget.
The inheritance tax threshold for sons or daughters has been reduced in successive budgets. It came down from €524,544 in 2009, to €225,000 in 2012.
Last year it went up to €280,000 in the Budget.
And the rate that the tax is applied to amounts which are over the threshold shot up from 20pc to 33pc in a number of austerity budgets.
In the Programme for Government, Fine Gael promised to raise the threshold at which children pay tax on the family home from €280,000 to €500,000.
But the Government now is not proposing to cut the 33pc tax rate which applies to bequests over the threshold.
According to the 'Programme for a Partnership Government', "We will work with the Oireachtas to raise the Band A Capital Acquisitions Tax threshold (including all gifts and inheritances from parents to their children) to €500,000."
But there is no mention of changing the rate the tax is applied, or increasing the threshold that applies when the beneficiary is a brother or sister, or a niece or nephew.
Fianna Fáil finance spokesperson Michael McGrath said any changes to inheritance tax thresholds in forthcoming Budgets should reflect the diversity of family structures in society.
Figures he obtained show that in 2015, one in three inheritance cases was in respect of nieces and nephews.
This was followed by gifts or inheritances involving what is known as "strangers in blood", or category C.
This category accounted for almost a quarter of cases.
A total of 21pc was in respect of a sibling, while only 18pc of cases involved a child.
"It is every person's wish to provide financial security for family members and people close to them," Mr McGrath said. "Some progress has been made in relation to inheritances between parents and their children.
"However, there are many other issues which must also be considered, including the cases of other family members and the interest rate which applies when a person seeks a deferral of a capital acquisitions tax bill."
Officials in the Department of Finance warned that only changing the thresholds for sons and daughters, and not making changes to the other categories, "would mean that the difference in treatment between transfers from a parent and other transfers will be considerably larger than it has been in the past".
Widening category B and C thresholds by between 5pc and 10pc would only cost between €5m and €10m, according to the Tax Strategy Group.
Fine Gael MEP Brian Hayes recently obtained figures showing over 50pc of inheritance tax is paid from the Dublin area.